President Biden cheered the report in a statement Thursday morning. “For months, doomsayers have been arguing that the U.S. economy is in a recession, and congressional Republicans have been rooting for a downturn,” he said. “But today we got further evidence that our economic recovery is continuing to power forward.”

By one common definition, the U.S. economy entered a recession when it experienced two straight quarters of shrinking G.D.P. at the start of the year. Officially, however, recessions are determined by a group of researchers at the National Bureau of Economic Research, who look at a broader array of indicators, including employment, income and spending.

Most analysts don’t believe the economy meets that more formal definition, and the third-quarter numbers — which slightly exceeded forecasters’ expectations — provided further evidence that a recession had not yet begun.

But the overall G.D.P. figures were skewed by the international trade component, which often exhibits big swings from one period to the next. Economists tend to focus on less volatile components, which have showed the recovery steadily losing momentum as the year has progressed. One closely watched measure suggested that private-sector demand stalled out almost completely in the third quarter.

Mortgage rates passed 7 percent on Thursday, their highest level since 2002.

“Housing is just the single largest trigger to additional spending, and it’s not there anymore; it’s going in reverse,” said Diane Swonk, chief economist at the accounting firm KPMG. “This has been a stunning turnaround in housing, and when things start to go really quickly, you start to wonder, what are the knock-on effects, what are the spillover effects?”

The third quarter was in some sense a mirror image of the first quarter, when G.D.P. shrank but consumer spending was strong. In both cases, the swings were driven by international trade. Imports, which don’t count toward domestic production figures, soared early this year as the strong economic recovery led Americans to buy more goods from overseas. Exports slumped as the rest of the world recovered more slowly from the pandemic.

Both trends have begun to reverse as American consumers have shifted more of their spending toward services and away from imported goods, and as foreign demand for American-made goods has recovered. Supply-chain disruptions have added to the volatility, leading to big swings in the data from quarter to quarter.

Few economists expect the strong trade figures from the third quarter to continue, especially because the strong dollar will make American goods less attractive overseas.

Jim Tankersley contributed reporting.

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

Nasdaq leads Wall St higher on hopes of less-hawkish Federal Reserve

>>> Don’t Miss Today’s BEST Amazon Deals!<<<<

  • Alphabet, Microsoft and S&P 500 futures dip after the bell
  • Consumer confidence sours, home price growth cools
  • S&P 500 closes 8% above Oct. 12 closing trough
  • Indexes up: Dow 1.07%, S&P 1.63%, Nasdaq 2.25%

NEW YORK, Oct 25 (Reuters) – U.S. stocks closed sharply higher on Tuesday as soft economic data hinted that the Fed’s aggressive policy is taking effect, while falling benchmark Treasury yields boosted the rally’s momentum.

All three major U.S. stock indexes advanced for the third straight session, with market-leading megacaps providing the most upside muscle. The S&P 500 has reclaimed about 8% from the trough of its Oct. 12 close.

“There’s increasing discussion about a light at the end of the tunnel for Fed rate hikes,” said Bill Merz, head of capital market research at U.S. Bank Wealth Management in Minneapolis. Merz also cautioned that it wouldn’t be known for some time whether decades-high inflation was “decisively headed toward the Fed’s target.”

“We’re seeing a bit of a reprieve in the dollar and long-term bond yields have come down a little bit,” Merz added. “Those factors are combining to provide room for a bit of a rally.”

After the bell, Microsoft (MSFT.O) and Alphabet (GOOGL.O) delivered weaker than expected quarterly results, sending their shares down about 7%. That helped push S&P 500 emini futures down almost 1%, suggesting traders expect the stock market to open deep in negative territory on Wednesday.

Yields of 10-year Treasuries pulled pack on hopes that the Federal Reserve could begin easing its battle against inflation.

A mixed brew of earnings and downbeat forecasts, usually a negative for markets, have suggested the barrage of interest rate hikes from the Fed is beginning to be felt, raising expectations that the central bank could pull back on the size of rate hikes after its Nov. 1-2 policy meeting.

Data on Tuesday showed slowing home price growth and souring consumer confidence. Such signs of economic softness, ordinarily unsupportive of risk appetite, are evidence of abating Fed hawkishness.

The financial market is nearly evenly split on whether the central bank’s December rate increase will ease to 50 basis points after a string of 75 basis point hikes, according to CME’s FedWatch tool.

People are seen on Wall Street outside the New York Stock Exchange (NYSE) in New York City, U.S., March 19, 2021. REUTERS/Brendan McDermid

The Dow Jones Industrial Average (.DJI) rose 337.12 points, or 1.07%, to 31,836.74, the S&P 500 (.SPX) gained 61.77 points, or 1.63%, to 3,859.11 and the Nasdaq Composite (.IXIC) added 246.50 points, or 2.25%, to 11,199.12.

Among the 11 major sectors of the S&P 500, all but energy (.SPNY) posted gains on the day, with real estate (.SPLRCR) enjoying the largest percentage gain.

Third-quarter reporting season is firing on all pistons, with 129 of the companies in the S&P 500 having reported. Of those, 74% have beaten consensus expectations, according to Refinitiv.

Analysts have set the bar low; aggregate S&P 500 earnings growth is now seen landing at 3.3% year-on-year, down from 4.5% at the beginning of the month, per Refinitiv.

Coca-Cola Co rose 2.4% after the company upped its revenue and profit forecasts, banking on steady demand amid price increases.

General Motors (GM.N) reaffirmed its outlook after posting solid earnings, sending its shares jumping 3.6%.

On the downside, aerospace company Raytheon Technologies Corp posted a near 5% annual revenue increase, but its shares slid 1.5% on the company’s trimmed sales outlook.

Advancing issues outnumbered declining ones on the NYSE by a 5.35-to-1 ratio; on Nasdaq, a 3.67-to-1 ratio favored advancers.

The S&P 500 posted 14 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 85 new highs and 120 new lows.

Volume on U.S. exchanges was 11.89 billion shares, compared with the 11.57 billion average over the last 20 trading days.

Reporting by Stephen Culp; Additional reporting by Amruta Khandekar and Shreyashi Sanyal in Bengaluru and Noel Randewich in Oakland, Calif.; editing by Grant McCool

Our Standards: The Thomson Reuters Trust Principles.

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

U.K. Live Updates: Liz Truss Resigns as Prime Minister

LONDON — For Liz Truss, the end came on Thursday in a midday meeting with grandees of the Conservative Party. But Ms. Truss’s fate as prime minister was all but sealed three weeks earlier when currency and bond traders reacted to her new fiscal program by torpedoing the pound and other British financial assets.

The market’s swift, withering verdict on Ms. Truss’s tax-cutting agenda shattered her credibility, degraded Britain’s reputation with investors, drove up home mortgage rates, pushed the pound down to near parity with the American dollar, and forced the Bank of England to intervene to prop up British bonds.

That repudiation, measured in the second-by-second fluctuations of bond yields and exchange rates, mattered more than the noisy departures of Ms. Truss’s cabinet ministers or the hothouse anxieties of Conservative lawmakers that ultimately made her position untenable.

For that reason, world leaders, buffeted by economic challenges, are watching the turmoil in Britain with anything but relish, concerned about the stability of Britain itself. Interest rates, energy costs and inflation are rising around the world. Labor unrest is proliferating across borders. Non-British pension funds potentially face the same financial stresses that afflicted those in Britain. The last thing leaders want is for Ms. Truss’s woes to be a harbinger for other countries.

President Emmanuel Macron of France, who recently mended fences with Ms. Truss after she refused last summer to characterize him as a friend or foe, said: “I wish in any case that Great Britain will find stability again and moves on, as soon as possible. It’s good for us, and it’s good for our Europe.”

Credit…Henry Nicholls/Reuters

Ms. Truss, economists said, is correct to argue that markets are driven by global trends broader than her tax cuts. Central banks worldwide are raising rates to battle inflation, which has been fueled by a surge in demand as the coronavirus pandemic ebbed and a spike in gas prices driven by Russia’s war in Ukraine.

“The problems are by no means all Truss’s doing but she should have known that getting blamed for everything comes with the territory,” said Kenneth Rogoff, a professor of economics at Harvard and a scholar of financial upheavals.

“What is really worrisome now,” he said, is that the situation in Britain “might be the canary in the coal mine as global interest rates keep soaring, especially as they do not seem likely to come down anytime soon.”

Ms. Truss long cultivated a reputation as a disrupter and a free-market evangelist in the tradition of Margaret Thatcher and Ronald Reagan. Her tax cut proposals made her an outlier among leaders of big economies fighting inflation. But she made no apologies for offending either economic orthodoxy or the expectations of financial markets in pursuit of her vision of a “low-tax, high growth” Britain.

“Not everyone will be in favor of change,” a defiant Ms. Truss said a week ago at the annual meeting of the Conservative Party, even though one of her planned tax cuts, for high-earning people, had already been reversed. “But everyone will benefit from the result: a growing economy and a better future.”

The prime minister’s fatal miscalculation, experts said, was to believe that Britain could defy the gravity of the markets by passing sweeping tax cuts, without corresponding spending cuts, at a time when inflation is running in double digits and interest rates were rising.

“It was the combination of the wrong fiscal policy at the wrong time — borrowing when rates were rising rather than, as in 2010s, when they were low,” said Jonathan Portes, a professor of economics and public policy at Kings College London.

He cited what he called Ms. Truss’s “institutional vandalism,’’ in particular the way she and her ousted chancellor of the Exchequer, Kwasi Kwarteng, broke with custom by announcing sweeping tax cuts without subjecting them to the scrutiny of the government’s fiscal watchdog, the Office of Budget Responsibility.

In that sense, he said, Ms. Truss was following in the footsteps of her predecessor, Boris Johnson, who resigned as prime minister barely three months earlier after a series of scandals prompted a wholesale walkout of his ministers.

Credit…Oli Scarff/Agence France-Presse — Getty Images

Mr. Kwarteng’s budget maneuvering led many in the markets to suspect the government was engaged in a kind of fiscal sleight of hand, which would inevitably require massive borrowing to cover a hole in the budget estimated at 72 billion pounds ($81.5 billion).

Mr. Kwarteng, who studied the history of financial crises as a doctoral student at Cambridge University, brushed off the blowback in financial markets as a temporary phenomenon. Like Ms. Truss, he is a believer in disruptive change. Together, they were among the authors of “Britannia Unchained,” a manifesto for a Thatcher-style, free-market revolution in post-Brexit Britain. Among other things, the authors described Britons as “among the worst idlers in the world.”

When, or even whether, Britain can fully recover from this period of political and economic turbulence is not yet clear. On Thursday, as news of Ms. Truss’s resignation broke, the pound rose against the dollar and yields on British government bonds fell.

Virtually all the government’s planned tax cuts have been reversed, and the next prime minister, regardless of his or her politics, will have little choice but to pursue a policy of spending cuts and strict fiscal discipline. Some fear a return to the bleak austerity of Prime Minister David Cameron in the years after the 2008 financial crisis.

“Rishi or another can steady the ship and calm the markets,” Professor Portes said, referring to Rishi Sunak, a former chancellor who ran unsuccessfully against Ms. Truss and may seek to succeed her. “But it’s hard to see how, given the state of the Conservatives, any Tory prime minister can repair the longer-term damage.”

Much of that damage is to Britain’s once-sterling reputation in the markets. Economists have begun mentioning Britain in the same breath as fiscally wayward countries like Italy and Greece. Lawrence H. Summers, the former U.S. Treasury secretary, told Bloomberg News, “It makes me very sorry to say, but I think the U.K. is behaving a bit like an emerging market turning itself into a submerging market.”

That is a humbling comedown for a country that in 2009 announced a $1.1 trillion emergency fund to bail out the global economy.

“If you’re an American fund manager, you’re not going to put Britain in the super-safe category you might have earlier,” said Jonathan Powell, who served as chief of staff to Prime Minister Tony Blair. “It’s not about Britain’s standing in the world, but what category we’ve put ourselves in.”

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

Global Fallout From Rate Moves Won’t Stop the Fed

The Federal Reserve has embarked on an aggressive campaign to raise interest rates as it tries to tame the most rapid inflation in decades, an effort the central bank sees as necessary to restore price stability in the United States.

But what the Fed does at home reverberates across the globe, and its actions are raising the risks of a global recession while causing economic and financial pain in many developing countries.

Other central banks in advanced economies, from Australia to the eurozone, are also lifting rates rapidly to fight their inflation. And as the Fed’s higher interest rates attract money to the United States — pumping up the value of the dollar — emerging-market economies are being forced to raise their own borrowing costs to try to stabilize their currencies to the extent possible.

Altogether, it is a worldwide push toward more expensive money unlike anything seen before in the 21st century, one that is likely to have serious ramifications.

warned the damage could be particularly acute in poorer nations. Developing economies had already been dealing with a cost-of-living crisis because of soaring food and fuel prices, and now their American imports are growing steadily more expensive as the dollar marches higher.

The Fed’s moves have spurred market volatility and worries about financial stability, as higher rates elevate the value of the U.S. dollar, making it harder for emerging-market borrowers to pay back their dollar-denominated debt.

It is a recipe for globe-spanning turmoil and even recession. Despite that, the Fed is poised to continue raising interest rates. That’s because the Fed, like central banks around the world, is in charge of domestic economy goals: It’s supposed to keep inflation slow and steady while fostering maximum employment. While occasionally called “central banker to the world” because of the dollar’s foremost position, the Fed goes about its day-to-day business with its eye squarely on America.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

The threat facing the global economy — including the Fed’s role in it — is expected to dominate the conversation next week as economists and government officials convene in Washington for the annual meeting of the International Monetary Fund and World Bank.

In a speech at Georgetown University on Thursday, Kristalina Georgieva, the managing director of the I.M.F., offered a grim assessment of the world economy and the tightrope that central banks are walking.

“Not tightening enough would cause inflation to become de-anchored and entrenched — which would require future interest rates to be much higher and more sustained, causing massive harm on growth and massive harm on people,” Ms. Georgieva said. “On the other hand, tightening monetary policy too much and too fast — and doing so in a synchronized manner across countries — could push many economies into prolonged recession.”

Noting that inflation remains stubbornly high and broad-based, she added: “Central banks have to continue to respond.”

The World Bank warned last month that simultaneous interest-rate increases around the world could trigger a global recession next year, causing financial crises in developing economies. It urged central banks in advanced economies to be mindful of the cross-border “spillover effects.”

“To achieve low inflation rates, currency stability and faster growth, policymakers could shift their focus from reducing consumption to boosting production,” David Malpass, the World Bank president, said.

Trade and Development Report said.

So far, major central banks have shown little appetite for stopping their inflation-busting campaigns. The Fed, which has made five rate increases this year, has signaled that it plans to raise borrowing costs even higher. Most officials expect to increase rates by at least another 1.25 percentage points this year, taking the policy rate to a range of 4.25 to 4.5 percent from the current 3 to 3.25 percent.

Even economies that are facing a pronounced slowdown have been lifting borrowing costs. The European Central Bank raised rates three-quarters of a point last month, even though the continent is approaching a dark winter of slowing growth and crushing energy costs.

according to the World Bank. Food costs in particular have driven millions further into extreme poverty, exacerbating hunger and malnutrition. As the dollar surge makes a range of imports pricier for emerging markets, that situation could worsen, even as the possibility of financial upheaval increases.

“Low-income developing countries in particular face serious risks from food insecurity and debt distress,” Ngozi Okonjo-Iweala, director-general of the World Trade Organization, said during a news conference this week.

In Africa, officials have been urging the I.M.F. and Group of 20 nations to provide more emergency assistance and debt relief amid inflation and rising interest rates.

“This unprecedented shock further destabilizes the weakest economies and makes their need for liquidity even more pressing, to mitigate the effects of widespread inflation and to support the most vulnerable households and social strata, especially young people and women,” Macky Sall, chairman of the African Union, told leaders at the United Nations General Assembly in September.

To be sure, central bankers in big developed economies like the United States are aware that they are barreling over other economies with their policies. And although they are focused on domestic goals, a severe weakening abroad could pave the way for less aggressive policy because of its implications for their own economic outlooks.

Waning demand from abroad could ease pressure on supply chains and reduce prices. If central bankers decide that such a chain reaction is likely to weigh on their own business activity and inflation, it may give them more room to slow their policy changes.

“The global tightening cycle is something that the Fed has to take into account,” said Megan Greene, global chief economist for the Kroll consulting firm. “They’re interested in what is going on in the rest of the world, inasmuch as it affects their ability to achieve their targets.”

his statement.

But many global economic officials — including those at the Fed — remain focused on very high inflation. Investors expect them to make another large rate increase when they meet on Nov. 1-2.

“We’re very attentive” to international spillovers to both emerging markets and advanced economies, Lisa D. Cook, a Fed governor, said during a question-and-answer session on Thursday. “But our mandate is domestic. So we’re very focused on inflation as it evolves in this country.”

Raghuram Rajan, a former head of India’s central bank and now an economist at the University of Chicago, has in the past pushed the Fed to take foreign conditions into account as it sets policy. He still thinks that measures like bond-buying should be pursued with an eye on global spillovers.

But amid high inflation, he said, central banks are required to pay attention to their own mandates to achieve price stability — even if that makes for a stronger dollar, weaker currencies and more pain abroad.

“The basic problem is that the world of monetary policy dances to the Fed’s tune,” Mr. Rajan said, later adding: “This is a problem with no easy solutions.”

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

Oil maintains most of recent gains ahead of OPEC+ meeting

>>> Don’t Miss Today’s BEST Amazon Deals!<<<<

  • OPEC+ met on Wednesday, cut output despite tight supply
  • U.S. crude, fuel stockpiles fell last week – EIA
  • Prices around $90 versus $120 in July
  • United States opposed to OPEC cuts, wants lower prices

NEW YORK, Oct 5 (Reuters) – Oil prices rose on Wednesday to three-week highs, as OPEC+ agreed to its deepest cuts to production since the 2020 COVID pandemic, despite a tight market and opposition to cuts from the United States and others.

Prices also rose on U.S. government data that showed crude and fuel inventories fell last week.

Brent crude rose $1.57, or 1.7%, to settle at $93.37 a barrel. Brent reached a session high of $93.96 per barrel, its highest since Sept. 15.

Register now for FREE unlimited access to Reuters.com

U.S. West Texas Intermediate (WTI) crude rose $1.24, or 1.4%, to settle at $87.76 a barrel. It reached $88.42 per barrel during the session, the highest since Sept. 15.

Both Brent and WTI rose sharply in the last two days.

The 2 million-barrel-per-day (bpd) cut from OPEC+ could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.

Oil had been rising this week in anticipation of the cuts, said Fiona Cincotta, senior financial markets analyst at City Index.

“The real impact of a large cut would be smaller, given that some of the members are failing to reach their output quotas,” Cincotta added.

In August, OPEC+ missed its production target by 3.58 million bpd as several countries were already pumping well below their existing quotas.

“We believe new output targets will mostly be shouldered by core Middle East countries, led by Saudi Arabia, the UAE and Kuwait,” said Rystad Energy’s analyst Jorge Leon.

Meanwhile, Russian Deputy Prime Minister Alexander Novak said on Wednesday that Russia may cut oil production in order to offset negative effects from price caps imposed by the West over Moscow’s actions in Ukraine. read more

The United States was pressing OPEC+ producers to avoid making deep cuts, a source familiar with the matter told Reuters, as President Joe Biden looks to prevent a rise in U.S. gasoline prices ahead of midterm congressional elections on Nov. 8. read more

Biden has been grappling with higher gasoline prices all year, which have eased after a spike, something his administration has touted as a major accomplishment.

In U.S. supply, crude stocks, gasoline and distillate inventories fell last week, the Energy Information Administration said. Crude inventories (USOILC=ECI) posted a surprise draw of 1.4 million barrels to 429.2 million barrels.

U.S. gasoline stocks (USOILG=ECI) fell more-than-expected by 4.7 million barrels, while distillate stockpiles (USOILD=ECI), which include diesel and heating oil, also posted a larger-than-expected draw, falling by 3.4 million barrels.

“We’re definitely seeing supplies of gasoline and diesel fall pretty dramatically,” said Phil Flynn, analyst at Price Futures Group in Chicago. “The mantra we’ve been seeing in recent weeks is the economy is slowing and oil prices were down because of peak demand, but these numbers seem to be holding up a lot better than people would think.”

Register now for FREE unlimited access to Reuters.com

Reporting by Stephanie Kelly in New York, Bozorgmehr Sharafedin in London, Sonali Paul in Melbourne and Isabel Kua in Singapore; Editing by Marguerita Choy, Elaine Hardcastle, Emelia Sithole-Matarise and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

Stephanie Kelly

Thomson Reuters

A New-York-based correspondent covering the U.S. crude market and member of the energy team since 2018 covering the oil and fuel markets as well as federal policy around renewable fuels.

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

Morning Bid: Not so fast

>>> Don’t Miss Today’s BEST Amazon Deals!<<<<

A look at the day ahead in United States and global markets from Mike Dolan

U-turns are clearly in the air this week, with Elon Musk’s volte face on buying Twitter on Tuesday following Britain’s top rate tax cut reversal and this week’s new-quarter relief bounce in stock markets.

Of course many investors pray global central banks would join the British government and Musk in a similar rethink – but that’s far less likely and reason enough for markets to sober up on Wednesday after the biggest two-day rally on Wall St (.SPX) since the pandemic hit in April 2020.

Register now for FREE unlimited access to Reuters.com

New Zealand’s central bank became the latest to stick to its guns lifting interest rates to a seven-year high and promising more to come as it struggles to cool red-hot inflation in an over-stretched economy. read more

British Prime Minister Liz Truss’ speech to her annual party conference is also due and she’s expected to insist the remainder of her fiscal plan remains intact.

Oil price gains this week are also a shot across the bow, with OPEC+ producers meeting in Vienna and looking to agree deep output target cuts despite a tight market. read more

Still there have been straws in the wind this week and some hopes for an easing of the year’s relentless selloff. The Musk news was just an added spur.

Twitter shares (TWTR.N) surged more than 20% on Tuesday after filings showed Musk would proceed with his original $44 billion takeover bid, calling for an end to a lawsuit by the social media company that could have forced him to pay up anyway. read more

The macro backdrop was all about hopes the Federal Reserve would take its foot off the interest rate brake and news that U.S. job openings fell by the most in nearly 2-1/2 years in August encouraged that. read more

With U.S. September private sector payroll readings from ADP due later – with forecasts for another 200,000 job gains – and Friday’s national employment report also in view, stock and bond markets have resumed a holding pattern. U.S. Treasury yields ticked back higher and S&P500 futures and European bourses dialled back almost 1%.

The dollar also steadied after this week’s sharp pullback, though there were growing signs its surge this year is causing some concern for U.S. policymakers as well as those overseas.

San Francisco Fed chief Mary Daly said the Fed is paying attention to the impact of the dollar on global growth because slowing growth abroad can feed back into the domestic economy. read more

“If Europe goes into recession, that’s a headwind; if China falters, that’s a headwind on our growth, and we have to take that into account so that we don’t end up overtightening policy,” she said.

Key developments that should provide more direction to U.S. markets later on Wednesday:

* Global September service sector business surveys.

* U.S. ADP Sept private sector payrolls report; U.S. Aug trade balance

* OPEC+ meeting in Vienna

* U.S. Atlanta Federal Reserve President Raphael Bostic speaks

Elon Musk vs Twitter
Reuters Graphics
JOLTS

Register now for FREE unlimited access to Reuters.com

By Mike Dolan, editing by XXX <a href=”mailto:mike.dolan@thomsonreuters.com” target=”_blank”>mike.dolan@thomsonreuters.com</a>. Twitter: @reutersMikeD. Editing by Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

View Source

>>> Don’t Miss Today’s BEST Amazon Deals! <<<<

A Strong Dollar Is Wreaking Havoc on Emerging Markets. A Debt Crisis Could Be Next.

The average household in Ghana is paying two-thirds more than it did last year for diesel, flour and other necessities. In Egypt, wheat is so expensive that the government has fallen half a billion dollars short of its budget for a bread subsidy it provides to its citizens. And Sri Lanka, already struggling to control a political crisis, is running out of fuel, food and medical supplies.

A strong dollar is making the problems worse.

Compared with other currencies, the U.S. dollar is the strongest it has been in two decades. It is rising because the Federal Reserve has increased interest rates sharply to combat inflation and because America’s economic health is better than most. Together, these factors have attracted investors from all over the world. Sometimes they simply buy dollars, but even if investors buy other assets, like government bonds, they need dollars to do so — in each case pushing up the currency’s value.

That strength has become much of the world’s weakness. The dollar is the de facto currency for global trade, and its steep rise is squeezing dozens of lower-income nations, chiefly those that rely heavily on imports of food and oil and borrow in dollars to fund them.

But much of the damage is already behind us.

  • Discordant Views: Some investors just don’t see how the Federal Reserve can lower inflation without risking high unemployment. The Fed appears more optimistic.
  • Weathering the Storm: The rout in the stock and bond markets has been especially rough on people paying for college, retirement or a new home. Here is some advice.
  • College Savings: As the stock and bond markets wobble, 529 plans are taking a tumble. What’s a family to do? There’s no one-size-fits-all answer, but you have options.
  • “We are in a fragile situation,” Mr. El-Erian said. “Country after country is flashing amber, and some are already flashing red.”

    Many lower-income countries were already struggling during the pandemic.

    Roughly 22 million people in Ghana, or a third of its population, reported a decline in their income between April 2020 and May 2021, according to a survey from the World Bank and Unicef. Adults in almost half of the households with children surveyed said they were skipping a meal because they didn’t have enough money. Almost three-quarters said the prices of major food items had increased.

    Then came Russia’s invasion of Ukraine. The war between two of the world’s largest exporters of food and energy led to a big surge in prices, especially for importers like Ghana. Consumer prices have gone up 30 percent for the year through June, according to data from the research firm Moody’s Analytics. For household essentials, annual inflation has reached 60 percent or more this year, the S&P data shows.

    To illustrate this, consider the price of a barrel of oil in dollars versus the Ghanaian cedi. At the beginning of October last year, the price of oil stood at $78.52 per barrel, rising to nearly $130 per barrel in March before falling back to $87.96 at the beginning of this month, a one-year increase of 12 percent in dollar terms. Over the same period, the Ghanaian cedi has weakened over 40 percent against the dollar, meaning that the same barrel of oil that cost roughly 475 cedi a year ago now costs over 900 cedi, almost twice as much.

    Adding to the problem are large state-funded subsidies, some taken on or increased through the pandemic, that are now weighing on government finances.

    Ghana’s president cut fuel taxes in November 2021, losing roughly $22 million in projected revenue for the government — the latest available numbers.

    In Egypt, spending on what the government refers to as “supply commodities,” almost all of which is wheat for its long-running bread subsidy, is expected to come in at around 7 percent of all government spending this year, 12 percent higher — or more than half a billion dollars — than the government budgeted.

    As costs ballooned throughout the pandemic, governments took on more debt. Ghana’s public debt grew to nearly $60 billion from roughly $40 billion at the end of 2019, or to nearly 80 percent of its gross domestic product from around 63 percent, according to Moody’s.

    It’s one of four countries listed by S&P, alongside Pakistan, Nigeria and Sri Lanka, where interest payments alone account for more than half of the government’s revenues.

    “We can’t forget that this is happening on the back end of a once-in-a-century pandemic in which governments, to try and support families as best they could, did borrow more,” said Frank Gill, an analyst at S&P. “This is a shock following up on another shock.”

    In May, Sri Lanka defaulted on its government debt for the first time in its history. Over the past month, the governments of Egypt, Pakistan and Ghana have all reached out to the International Monetary Fund for a bailout as they struggle to meet their debt financing needs, no longer able to turn to international investors for more money.

    “I don’t think there is a lot of appetite to lend money to some of these countries,” said Brian Weinstein, co-head of credit trading at Bank of America. “They are incredibly vulnerable at the moment.”

    That vulnerability is already reflected in the bond market.

    In 2016, Ghana borrowed $1 billion for 10 years, paying an interest rate of just over 8 percent. As the country’s financial position has worsened and investors have backed away, the yield — indicative of what it would now cost Ghana to borrow money until 2026 — has risen to above 35 percent.

    It’s an untenable cost of debt for a country in Ghana’s situation. And Ghana is not alone. For bonds that also mature in 2026, yields for Pakistan have reached almost 40 percent.

    “We have concerns where any country has yields that calls into question their ability to refinance in public markets,” said Charles Cohen, deputy division chief of monetary and capital market departments at IMF.

    The risk of a sovereign debt crisis in some emerging markets is “very, very high,” said Jesse Rogers, an economist at Moody’s Analytics. Mr. Rogers likened the current situation to the debt crises that crushed Latin America in the 1980s — the last time the Fed sought to quell soaring inflation.

    Already this year, more than $80 billion has been withdrawn from mutual funds and exchange-traded funds — two popular types of investment products — that buy emerging market bonds, according to EPFR Global, a data provider. As investors sell, the United States is often the beneficiary, further strengthening the dollar.

    “It’s by far the worst year for outflows the market has ever seen,” said Pramol Dhawan, head of emerging markets at Pimco.

    Even citizens in some of these countries are trying to exchange their money for dollars, fearful of what’s to come and of further currency depreciation — yet inadvertently also contributing to it.

    “For pockets of emerging markets, this is a really challenging backdrop and one of the most challenging backdrops we have faced for many years,” Mr. Dhawan said.

    View Source

    >>> Don’t Miss Today’s BEST Amazon Deals! <<<<

    Less Turnover, Smaller Raises: Hot Job Market May Be Losing Its Sizzle

    Last year, Klaussner Home Furnishings was so desperate for workers that it began renting billboards near its headquarters in Asheboro, N.C., to advertise job openings. The steep competition for labor drove wages for employees on the furniture maker’s production floor up 12 to 20 percent. The company began offering $1,000 signing bonuses to sweeten the deal.

    “Consumer demand was through the roof,” said David Cybulski, Klaussner’s president and chief executive. “We just couldn’t get enough labor fast enough.”

    But in recent months, Mr. Cybulski has noticed that frenzy die down.

    Hiring for open positions has gotten easier, he said, and fewer Klaussner workers are leaving for other jobs. The company, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages. The $1,000 signing bonus ended in the spring.

    “No one is really chasing employees to the dollar anymore,” he said.

    By many measures, the labor market is still extraordinarily strong even as fears of a recession loom. The unemployment rate, which stood at 3.7 percent in August, remains near a five-decade low. There are twice as many job openings as unemployed workers available to fill them. Layoffs, despite some high-profile announcements in recent weeks, are close to a record low.

    Walmart and Amazon have announced slowdowns in hiring; others, such as FedEx, have frozen hiring altogether. Americans in July quit their jobs at the lowest rate in more than a year, a sign that the period of rapid job switching, sometimes called the Great Resignation, may be nearing its end. Wage growth, which soared as companies competed for workers, has also slowed, particularly in industries like dining and travel where the job market was particularly hot last year.

    More broadly, many companies around the country say they are finding it less arduous to attract and retain employees — partly because many are paring their hiring plans, and partly because the pool of available workers has grown as more people come off the economy’s sidelines. The labor force grew by more than three-quarters of a million people in August, the biggest gain since the early months of the pandemic. Some executives expect hiring to keep getting easier as the economy slows and layoffs pick up.

    “Not that I wish ill on any people out there from a layoff perspective or whatever else, but I think there could be an opportunity for us to ramp some of that hiring over the coming months,” Eric Hart, then the chief financial officer at Expedia, told investors on the company’s earnings call in August.

    Taken together, those signals point to an economic environment in which employers may be regaining some of the leverage they ceded to workers during the pandemic months. That is bad news for workers, particularly those at the bottom of the pay ladder who have been able to take advantage of the hot labor market to demand higher pay, more flexible schedules and other benefits. With inflation still high, weaker wage growth will mean that more workers will find their standard of living slipping.

    But for employers — and for policymakers at the Federal Reserve — the calculation looks different. A modest cooling would be welcome after months in which employers struggled to find enough staff to meet strong demand, and in which rapid wage growth contributed to the fastest inflation in decades. Too pronounced a slowdown, however, could lead to a sharp rise in unemployment, which would almost certainly lead to a drop in consumer demand and create a new set of problems for employers.

    Recent research from economists at the Federal Reserve Banks of Dallas and St. Louis found that there had been a huge increase in poaching — companies hiring workers away from other jobs — during the recent hiring boom. If companies become less willing to recruit workers from competitors, and to pay the premium that doing so requires, or if workers become less likely to hop between jobs, that could lead wage growth to ease even if layoffs don’t pick up.

    There are hints that could be happening. A recent survey from another career site, ZipRecruiter, found that workers have become less confident in their ability to find a job and are putting more emphasis on finding a job they consider secure.

    “Workers and job seekers are feeling just a little bit less bold, a little bit more concerned about the future availability of jobs, a little bit more concerned about the stability of their own jobs,” said Julia Pollak, chief economist at ZipRecruiter.

    Some businesses, meanwhile, are becoming a bit less frantic to hire. A survey of small businesses from the National Federation of Independent Business found that while many employers still have open positions, fewer of them expect to fill those jobs in the next three months.

    More clues about the strength of the labor market could come in the upcoming months, the time of year when companies, including retailers, traditionally ramp up hiring for the holiday season. Walmart said in September that this year it would hire a fraction of the workers it did during the last holiday season.

    The signs of a cool-down extend even to leisure and hospitality, the sector where hiring challenges have been most acute. Openings in the sector have fallen sharply from the record levels of last year, and hourly earnings growth slowed to less than 9 percent in August from a rate of more than 16 percent last year.

    Until recently, staffing shortages at Biggby Coffee were so severe that many of the chain’s 300-plus stores had to close early some days, or in some cases not open at all. But while hiring remains a challenge, the pressure has begun to ease, said Mike McFall, the company’s co-founder and co-chief executive. One franchisee recently told him that 22 of his 25 locations were fully staffed and that only one was experiencing a severe shortage.

    “We are definitely feeling the burden is lifting in terms of getting people to take the job,” Mr. McFall said. “We’re getting more applications, we’re getting more people through training now.”

    The shift is a welcome one for business owners like Mr. McFall. He said franchisees have had to raise wages 50 percent or more to attract and retain workers — a cost increase they have offset by raising prices.

    “The expectation by the consumer is that you are raising prices, and so if you don’t take advantage of that moment, you are going to be in a pickle,” he said, referring to the pressure to increase wages. “So you manage it by raising prices.”

    So far, Mr. McFall said, higher prices haven’t deterred customers. Still, he said, the period of severe staffing shortages is not without its costs. He has seen a loss in sales, as well as a loss of efficiency and experienced workers. That will take time to rebuild, he said.

    “When we were in crisis, it was all we were focused on,” he said. “So now that it feels like the crisis is mitigating, that it’s getting a little better, we can now begin to focus on the culture in the stores and try to build that up again.”

    View Source

    >>> Don’t Miss Today’s BEST Amazon Deals! <<<<

    U.K. Borrowers React to Soaring Interest Rates in Mortgage Market

    LOUGHTON, England — After nearly two decades of renting in one of the world’s most expensive cities, the Szostek family began the week almost certain that they would finally own a home.

    Transplants to London who fell in love as housemates, Laetitia Anne, an operations manager from France and her husband, Maciej Szostek, a chef from Poland, had long dreamed of being homeowners. They had waited out the uncertain pandemic years and worked overtime shifts to save up for the deposit for a mortgage on a three-bedroom apartment in a neighborhood outside London. Their 13-year-old twins were excited they could finally paint the walls.

    That was before British financial markets were upended, with the pound briefly hitting a record low against the dollar on Monday and interest rates soaring so rapidly that the Bank of England was forced to intervene to restore order. The economic situation was so volatile that some mortgage lenders temporarily withdrew many products.

    By Tuesday evening, the Szostek family learned the bad news: The loan that they were close to securing had fallen through. Suddenly, they were scrambling to find another lender as interest rates climb higher.

    loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

    Rising home prices and income inequality priced many out of the market, but for strivers who aspired to homeownership, the latest ruptures to the economy hit hard. The release of the new government’s sweeping plan for debt-funded tax cuts led to a big uptick in interest rates this week that roiled the mortgage market. Many homeowners are calculating their potential future mortgage payments with alarm, amid soaring energy and food prices and a general cost-of-living crisis.

    Before they were informed they were no longer eligible, the family had been in the final stages of applying for a five-year fixed-rate mortgage on an apartment priced at £519,000, or around $576,000, in the leafy parish of Loughton, a town about 40 minutes north of London by train where the streets fill with students in the afternoon and the properties span from lower-end apartments to million-pound mansions.

    according to the Financial Conduct Authority. And more than a third of all mortgages are on fixed rates that expire within the next two years, most likely exposing those borrowers to higher rates, too. By contrast, the vast majority of mortgages in the United States are locked in for 30-year fixed terms.

    And the abrupt surge in interest rates could threaten to set off a housing market crisis, analysts at Oxford Economics wrote in a note on Friday, adding that if mortgage rates stayed at the levels now being offered, that would suggest that house prices were around 30 percent overvalued “based on the affordability of mortgage payment.”

    “This just adds a significant further strain to finances in the order of hundreds of pounds a month,” said David Sturrock, a senior research economist at the Institute for Fiscal Studies, adding that the squeeze on household budgets will affect the broader economy.

    Uncertainty and even panic was clear this week, with many homeowners seeking financial advice. Mortgage brokers said they were receiving a higher volume of inquiries than normal from people stressed about refinancing their loans.

    “You can feel the fear in people’s voices,” said Caroline Opie, a mortgage broker working with Ms. Anne who said she had not seen this level of worry in a long time. One couple this week even called her the morning of their wedding, she said, to set an appointment to refinance their mortgage next week.

    the war in Ukraine. “Something has got to give,” he said. “Prices are too high anyway.”

    To save for the deposit, Mr. Szostek, 37, picked up construction shifts and cleaning jobs when restaurants closed during Covid-19 lockdowns. A £5,000 inheritance from Ms. Anne’s grandfather went into their deposit fund. At a 3.99 percent interest rate, the mortgage repayments were set to be about £2,200 a month.

    “I wanted to feel at home for real,” said Ms. Anne, adding she would have been the first in her family to own a property. Mr. Szostek called it “a lifelong dream.”

    On Wednesday night, that dream still seemed in reach: The mortgage dealer Ms. Opie had found another loan, which they rushed to apply for.

    The higher interest rate — 4.6 percent — will mean their new monthly mortgage payment will be £2,400, the upper limit of what the Szostek family can afford. Still, they felt lucky to secure anything at all, hoping it will mean their promises to their children — of bigger bedrooms, more space, freedom to decorate how they like — will materialize.

    They would wait to celebrate, Mr. Szostek said, until they had the keys in hand.

    View Source

    >>> Don’t Miss Today’s BEST Amazon Deals! <<<<

    Shredding Convention: Propy Unveils “MetaAgent X Shredders” NFTs

    MIAMI–(BUSINESS WIRE)–Propy, the Web3 real estate pioneer, is launching the first NFT (Non-fungible token) Avatars designed specifically for Real Estate and Metaverse fans. The limited-edition “MetaAgents X Shredders” NFTs were created by noted artist Dan Weinstein. The project’s advisors include real estate influencers and industry forward-thinkers Tom Ferry, Tony Giordano, Alvaro Nunes, Tony Edward, ThinkingCrypto, Zach Aaron, MetaProp, among others.

    “It’s an endless open sea of creative NFT ideas out there and as usual, this is where Propy continues to stand out. If you love crypto and real estate then these NFT Avatars are right for you. With Real Estate becoming more crypto-friendly, adding one of these ‘MetaAgents X Shredders’ to your collection or used as your social media profile, will signal to the world and your tech-savvy peers that you are a visionary in a new digital world of real estate,” said Natalia Karayaneva, CEO of Propy.

    Over 6,000 joined the waiting list in anticipation of the “MetaAgents X Shredders” drop on September 27, 2022 at 10:00am pacific time on seen.haus and can only be minted with PRO – Propy tokens. First come first serve and sold by lottery auction. Starting price 500PRO.

    “These characters are THE RESISTANCE – shredding through the Metaverse, re-inventing the new future. The meta world created by the agents of change – fair, honest and empowering,” said artist and designer, Dan Weinstein.

    The Propy NFT Avatars come with unique utilities like access to the Meta Agent educational course, owners become members of DAO (decentralized autonomous organization) and receive a ticket to the Web3 & Real Estate Summit coming up on October 27th in Miami. The Meta Agent certification and the Summit will help real estate fans navigate metaverses and Web3 proptech and apply the learnings to their daily business.

    “Many agents and real estate investors are interested in crypto and NFTs. As more home buyers utilize crypto earnings to purchase property, displaying an avatar immediately identifies these agents as someone who understands how cryptocurrency and NFTs work,” said Tom Ferry, #1 US Real Estate coach.

    More about the NFT Avatars can be found here: https://propy.com/browse/meta-agent-nft-avatars/

    About Propy

    Propy, founded in Silicon Valley, is on a mission to revolutionize real estate. The company’s smart contract innovation removes inefficiencies, streamlines everything from offer to closing to recording title, records everything securely on blockchain, and enables buyers and sellers to use traditional financing, dollar or cryptocurrency payments, or NFT-ed property sales. The company has processed $4bn in transactions and recorded them on blockchain. Learn more at Propy.com

    View Source

    >>> Don’t Miss Today’s BEST Amazon Deals! <<<<