Author Archives: Reuters News Agency

Global stock markets slip on inflation, tax and regulation worries

By Sujata Rao and Elizabeth Dilts Marshall

NEW YORK (Reuters) – World stock markets edged lower on Monday on inflation worries, as well as tax and regulatory pressures on the world’s biggest companies.

Leading Democrats in the U.S. House of Representatives said on Monday they are seeking to raise the tax rate on corporations to 26.5%, up from the current 21%.

The MSCI world equity index, which tracks shares in 45 nations, rose 0.01%, while U.S. stocks started mixed.

The Dow Jones Industrial Average rose 0.72% and the S&P 500 0.03%. The Nasdaq Composite dropped 0.41%, as investors pivoted away from major technology stocks to sectors more likely to benefit from an economic bounce later this year.

The dollar climbed to a two-week peak against a basket of major currencies as investors continued to price in expectations that the U.S. Federal Reserve could reduce its asset purchases sooner rather than later despite a surge in COVID-19 cases.

A flurry of U.S. economic data is due this week, starting with U.S. consumer price data on Tuesday, which will give a broad picture of the economy’s progress ahead of the U.S. Federal Reserve’s meeting next week.

China fired a fresh regulatory shot at its tech giants – telling them to end a long-standing practice of blocking each other’s links on their websites. The Financial Times also reported that Beijing is aiming to break up the payments app Alipay.

The Chinese blue-chip index fell 0.5% and MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.86% lower. Japan’s Nikkei rose 0.22%.

“We will see more of the state finding ways to extract funding from those it deems most capable of providing it,” said Tom O’Hara, portfolio manager at Janus Henderson.

INFLATION IN FOCUS

The continued acceleration in inflation added to concerns, with data showing factory gate inflation at more than decade-highs in the United States and China, and Japan reporting wholesale prices at 13-year highs last month.

“The market has been looking through inflation levels, assuming they are transitory and that interest rates won’t go up much, but the conundrum is that wherever we look, we will probably see more inflation and interest rate rises than people think,” O’Hara added.

A market gauge of euro zone inflation expectations rose to its highest since mid-2015 on Monday as supply bottlenecks and stronger-than-expected inflation prints encourage investors to seek inflation protection.

Inflation in the bloc will “in all likelihood” ease as soon as next year but the European Central Bank is ready to act if it does not, ECB policymaker Isabel Schnabel said.

Banks continue to flag caution. A Deutsche Bank survey found market players expect a 5-10% equity market correction by year-end, with COVID and inflation seen as the main risks.

BNP Paribas, while expecting the S&P 500 to stay unchanged by end-2021, highlighted risks from “higher yields and taxes, at a time when earnings momentum has slowed from excellent to good.”

It also lowered estimates for emerging markets, stemming from Chinese policy risks.

The yield on the U.S. 10-year Treasury was 1.3191 percent.

The general air of risk aversion helped lift the dollar index to 92.65, up 0.07% and off recent lows of 91.941.

Brent crude was last up $0.64, or 0.88%, at $73.56 a barrel. U.S. crude was last up $0.84, or 1.2%, at $70.56 per barrel.

Graphic: Global Oil Demand Growth Forecasts: https://graphics.reuters.com/GLOBAL-OIL/lbvgngrzdpq/chart.png

(Reporting by Sujata Rao in London and Elizabeth Dilts Marshall in New York; additional reporting by Wayne Cole in Sydney and Dhara Ranasinghe in London; editing by Emelia Sithole-Matarise, Chizu Nomiyama and Dan Grebler)

N.Korea tests first ‘strategic’ cruise missile with possible nuclear capability

By Hyonhee Shin and Josh Smith

SEOUL (Reuters) -North Korea carried out successful tests of a new long-range cruise missile over the weekend, state media said on Monday, seen by analysts as possibly the country’s first such weapon with a nuclear capability.

The missiles are “a strategic weapon of great significance” and flew 1,500 km (930 miles) before hitting their targets and falling into the country’s territorial waters during the tests on Saturday and Sunday, KCNA said.

The latest test highlighted steady progress in Pyongyang’s weapons programme https://www.reuters.com/article/us-northkorea-missiles-southkorea-analys-idUSKBN2BM0G8 amid a gridlock over talks aimed at dismantling the North’s nuclear and ballistic missile programmes in return for U.S. sanctions relief. The talks have stalled since 2019.

North Korea’s cruise missiles usually generate less interest than ballistic missiles because they are not explicitly banned under U.N. Nations Security Council Resolutions.

“This would be the first cruise missile in North Korea to be explicitly designated a ‘strategic’ role,” said Ankit Panda, a senior fellow at the U.S.-based Carnegie Endowment for International Peace. “This is a common euphemism for nuclear-capable system.”

It is unclear whether North Korea has mastered the technology needed to build warheads small enough to be carried on a cruise missile, but leader Kim Jong Un said earlier this year that developing smaller bombs is a top goal.

The two Koreas have been locked in an accelerating arms race that analysts fear will leave the region littered with powerful new missiles. https://www.reuters.com/world/asia-pacific/caught-between-china-us-asian-countries-stockpile-powerful-new-missiles-2021-07-20

South Korea’s military did not disclose whether it had detected the North’s latest tests, but said on Monday it was conducting a detailed analysis in cooperation with the United States.

The U.S. military’s Indo-Pacific Command (INDOPACOM) said it was aware of the reports and was coordinating with its allies and partners.

“This activity highlights (North Korea’s) continuing focus on developing its military program and the threats that poses to its neighbours and the international community,” INDOPACOM said in a statement.

Rodong Sinmun, the ruling Workers’ Party’s official newspaper, ran photos of the new cruise missile flying and being fired from a transporter-erector-launcher.

The test provides “strategic significance of possessing another effective deterrence means for more reliably guaranteeing the security of our state and strongly containing the military manoeuvres of the hostile forces,” KCNA said.

It was seen as the North’s first missile launch after it tested a new tactical short-range ballistic missile in March. North Korea also conducted a cruise missile test just hours after U.S. President Joe Biden took office in late January.

SERIOUS CAPABILITY

Jeffrey Lewis, a missile researcher at the James Martin Center for Nonproliferation Studies, said intermediate-range land-attack cruise missiles were no less a threat than ballistic missiles and were a pretty serious capability for North Korea.

“This is another system that is designed to fly under missile defence radars or around them,” Lewis said on Twitter.

Cruise missiles and short-range ballistic missiles that can be armed with either conventional or nuclear bombs are particularly destabilising in the event of conflict as it can be unclear which kind of warhead they are carrying, analysts said.

Kim Jong Un did not appear to have attended the test, with KCNA saying Pak Jong Chon, a member of the Workers’ Party’s powerful politburo and a secretary of its central committee, oversaw it.

The reclusive North has long accused the United States and South Korea of “hostile policy” toward Pyongyang.

The unveiling of the test came just a day before chief nuclear negotiators from the United States, South Korea and Japan meet in Tokyo to explore ways to break the standoff with North Korea.

China’s foreign minister, Wang Yi, is also scheduled to visit Seoul on Tuesday for talks with his counterpart, Chung Eui-yong.

Biden’s administration has said it is open to diplomacy to achieve North Korea’s denuclearisation, but has shown no willingness to ease sanctions.

Sung Kim, the U.S. envoy for North Korea, said in August in Seoul that he was ready to meet with North Korean officials “anywhere, at any time.”

A reactivation of inter-Korean hotlines in July raised hopes for a restart of the negotiations, but the North stopped answering calls as annual South Korea-U.S. military exercises began last month, which Pyongyang had warned could trigger a security crisis.

In recent weeks South Korea became the first non-nuclear state to develop and test a submarine-launched ballistic missile. https://www.reuters.com/world/asia-pacific/skorea-blazes-new-path-with-most-potent-conventional-missile-submarine-2021-09-08

(Reporting by Hyonhee Shin and Josh Smith; Additional reporting by Idrees Ali in Washington; Editing by Daniel Wallis, Peter Cooney and Lincoln Feast.)

U.S. FDA says robust safety data needed before COVID-19 vaccine approval for kids

(Reuters) – U.S. Food and Drug Administration said on Friday clinical trials testing COVID-19 vaccines for children are expected to include a monitoring period of at least two months after half the participants get the shots to ensure safety.

The comments come as vaccine makers race to submit clinical data seeking regulatory approval for the use of their vaccines in children below 12, as schools around the country begin to reopen for in-person learning.

German drugmaker and Pfizer Inc’s partner, BioNTech SE, earlier on Friday said it was set to request approval across the globe to use its COVID-19 vaccine in children as young as five over the next few weeks.

“Children are not small adults – and issues that may be addressed in pediatric vaccine trials can include whether there is a need for different doses or different strength formulations of vaccines already used for adults,” FDA Acting Commissioner Janet Woodcock said in a joint statement with the director of Center for Biologics Evaluation and Research.

(Reporting by Manojna Maddipatla in Bengaluru)

GM CFO sees “more stable” chip supplies in 2022, reaffirms 2021 outlook

DETROIT (Reuters) – General Motors Co Chief Financial Officer Paul Jacobson reaffirmed the automaker’s 2021 profit outlook and said the company expects a “more stable year” in 2022 for semiconductor supplies.

Jacobson said during a conference call with investors that GM still expects to deliver pre-tax profits for 2021 in the range of $11.5 billion to $13.5 billion forecast last month, and said 10% pre-tax margins for GM’s North American operations are “quite achievable” in 2022 even as the company ramps up investment in electric vehicles.

Despite the uncertainty created by the continuing pandemic and supply chain disruptions, Jacobson said GM “does not want to drive a level of COVID austerity into the business” and will not pull back its investment plans.

Jacobson cautioned that GM’s third quarter wholesale deliveries could be down by 200,000 vehicles because of chip shortages, and because GM shifted production into the second quarter as it managed semiconductor supplies.

Jacobson said GM expects to get reimbursed by electric vehicle battery partner LG Chem for costs related to the recent recall of Chevrolet Bolt EVs due to fires related to battery defects. GM has set aside $1.8 billion in total for the recall. Jacobson said GM and LG are in “high level conversations” about the division of costs.

(Reporting By Joe White)

Taliban response to Afghan protests increasingly violent, U.N. says

GENEVA (Reuters) – The U.N. rights office on Friday said that the Taliban response to peaceful marches in Afghanistan has been increasingly violent, with authorities using live ammunition, batons and whips and causing the deaths of at least four protesters.

Protests and demonstrations, often led by women, pose a challenge to the new Islamist Taliban government as it seeks to consolidate control after seizing the capital Kabul nearly a month ago.

“We have seen a reaction from the Taliban which has unfortunately been severe,” Ravina Shamdasani, U.N. rights spokesperson, told a briefing in Geneva, saying the United Nations had documented four protester deaths from gunfire.

However, she said that some or all may have resulted from efforts to disperse protesters with firing.

She added that the United Nations had also received reports of house-to-house searches for those who participated in the protests. Journalists covering the protests have also been intimidated.

“In one case, one journalist was reported to have been told, as he was being kicked in the head, ‘You are lucky you haven’t been beheaded’,” Shamdasani said. “Really there has been lots of intimidation of journalists simply trying to do their job.”

(Reporting by Emma Farge; Editing by Douglas Busvine and Kevin Liffey)

UPS moves into gig delivery space with Roadie buy

(Reuters) – United Parcel Service Inc on Friday announced plans to buy Roadie, a crowd-sourced, same-day delivery company whose major clients include home improvement chain Home Depot.

The companies did not disclose financial terms of the deal, which is scheduled to close in the fourth quarter.

The purchase aims to help UPS meet demand for speedy local delivery of goods from fresh food to bulky furnishings, niches not easily addressed by the existing infrastructure of the world’s biggest parcel delivery firm.

“Roadie often provides service for shipments not compatible with the UPS network because of their size and perishable nature, and often because they are in shopping bags without the packaging required to move through the UPS system,” UPS said in a statement.

Following the completion of the acquisition, Roadie will continue to operate with its existing name.

Goods transported by Roadie will not cross into the UPS network and packages transported by UPS will not cross into the Roadie network, UPS said.

The union representing UPS delivery drivers did not immediately comment on the pending deal.

(Editing by Jan Harvey)

Supply bottlenecks keep heat on U.S. producer prices

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. producer prices increased solidly in August, leading to the biggest annual gain in nearly 11 years, suggesting that high inflation is likely to persist for a while as the unrelenting COVID-19 pandemic continues to pressure supply chains.

There are, however, signs that inflation could be nearing its peak, with the report from the Labor Department on Friday showing underlying producer prices rising at their slowest pace in nine months in August. High inflation is eroding households’ purchasing power, contributing to the downgrading of economic growth estimates for the third quarter.

“Inflation continues to see the impact of pandemic effects including strong demand and supply constraints,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “The demand impact will likely fade over coming months. But there is more risk from supply chains, if they continue to be disrupted by virus outbreaks.”

The producer price index for final demand rose 0.7% last month after two straight monthly increases of 1.0%. The gain was led by a 0.7% advance in services following a 1.1% jump in July.

Trade services, which measure changes in margins received by wholesalers and retailers, accounted for two-thirds of the broad rise in services. Goods prices jumped 1.0% after climbing 0.6% in July. In the 12 months through August, the PPI accelerated 8.3%, the biggest year-on-year advance since November 2010 when the series was revamped, after surging 7.8% in July.

Economists polled by Reuters had forecast the PPI gaining 0.6% on a monthly basis and rising 8.2% year-on-year.

U.S. stocks opened higher. The dollar was steady against a basket of currencies. U.S. Treasury prices were lower.

Though surveys from the Institute for Supply Management this month showed measures of prices paid by manufacturers and services industries fell significantly in August, they remained elevated. Factories and services providers still struggled to secure labor and raw materials, and faced logistics delays.

This was corroborated by the Federal Reserve’s Beige Book report on Wednesday compiled from information collected on or before Aug. 30 showing “contacts reported generally higher input prices but, as with labor, they were mostly concerned about getting the supplies they needed versus the price.”

Very low inventory levels because of the supply bottlenecks have allowed producers to easily pass on the higher costs to consumers. The Fed’s preferred inflation measure, the core personal consumption expenditures price index, increased 3.6% in the 12 months through July after a similar gain in June.

High inflation and supply constraints, which tanked motor vehicle sales in August, have prompted economists to slash their third-quarter gross domestic product growth estimates to as low as a 3.5% annualized rate from as high as 8.25%. The economy grew at a 6.6% rate in the second quarter.

“The danger with inflation is once prices go up, they don’t go back down and the economy and producers and consumers all have to live in a costlier world where many don’t have the means to do more than just barely survive,” said Chris Rupkey, chief economist at FWDBONDS in New York.

But inflation is likely nearing its peak. Excluding the volatile food, energy and trade services components, producer prices rose 0.3%, the smallest gain since last November. The so-called core PPI shot up 0.9% in July.

In the 12 months through August, the core PPI accelerated 6.3%. That was the largest rise since the government introduced the series in August 2014 and followed a 6.1% increase in July.

(Reporting by Lucia Mutikani;Editing by Chizu Nomiyama and Andrea Ricci)

Lebanon agrees new government to tackle economic collapse

By Maha El Dahan and Laila Bassam

BEIRUT (Reuters) – Lebanese leaders agreed a new government led by Sunni Muslim tycoon Najib Mikati https://www.reuters.com/world/middle-east/sunni-tycoon-mikati-leads-lebanons-first-government-year-2021-09-10 on Friday after a year of feuding over cabinet seats that has exacerbated a devastating economic collapse, opening the way to a resumption of talks with the IMF.

The breakthrough followed a flurry of contacts from France which has led efforts to get Lebanon’s fractious leaders to agree a cabinet and begin reforms since last year’s catastrophic Beirut port explosion, senior Lebanese political sources said.

There was no immediate comment from the French foreign ministry.

In televised comments, Mikati’s eyes welled up with tears and his voice broke as he described the hardship and emigration inflicted by the crisis, which has forced three quarters of the population into poverty.

The biggest threat to Lebanon’s stability since the 1975-90 civil war, the crisis hit a crunch point last month when fuel shortages brought much of the country to a standstill, triggering numerous security incidents, adding to Western concern https://www.reuters.com/world/middle-east/eu-worried-lebanons-fast-deterioration-says-time-has-run-out-2021-08-26 and warnings of worse to come https://www.reuters.com/world/middle-east/lebanese-security-chief-warns-crisis-could-be-prolonged-2021-08-27 unless something is done.

Mikati and President Michel Aoun, a Maronite Christian, signed a decree establishing the government in the presence of Nabih Berri, the Shi’ite Muslim speaker of parliament, the presidency said.

Mikati said divisive politics must be set to one side and that he could not go for talks with the International Monetary Fund only to encounter opposition at home.

He pledged to seek support from Arab countries, a number of which have shunned Lebanon because of the extensive influence wielded in Beirut by the heavily armed, Iran-backed Shi’ite Islamist group Hezbollah.

Lebanon could no longer afford to subsidise goods such as imported fuel, he said, adding the country did not have the hard currency reserves for such support.

Addressing the daily hardships, he described how mothers had been forced to cut back on milk for their children.

“If a mother’s eldest son leaves the country and she has tears in her eyes, she can’t buy a Panadol pill,” he said, referring to medicine shortages.

ELECTIONS ON TIME

Mikati also said parliamentary elections scheduled for next Spring would go ahead on time.

Like the outgoing cabinet of Prime Minister Hassan Diab, the new one comprises ministers with technical expertise who are not prominent politicians but have been named by the main parties.

Youssef Khalil, a senior central bank official and aide to governor Riad Salameh, was named finance minister in the proposed new cabinet line-up.

The heavily armed, Shi’ite Islamist movement Hezbollah, a political ally of Aoun which is designated a terrorist group by the United States, named two of the 24 ministers.

The crisis, which came to a head in late 2019, stems from decades of corruption in the state and unsustainable financing.

The steadily deteriorating situation worsened precipitously in August when the central bank announced it could no longer finance fuel imports at heavily subsidised exchange rates.

The failure to agree a cabinet has left Lebanon without any effective government as the country has sunk deeper into a crisis which the World Bank has described as one of the sharpest implosions of modern times.

Mikati, a politician-businessman who was designated prime minister in July, has previously said he would seek to re-start negotiations with the IMF once his government was formed.

Mikati was the third prime minister-designate to attempt to form the government since the government resigned over a year ago after the port explosion.

Mikati was designated after Saad al-Hariri, a former prime minister, abandoned his efforts.

Hariri traded blame for the failure with Aoun.

Aoun’s political adversaries have accused him and his political party, the Free Patriotic Movement, of seeking effective veto power in the new government by demanding a third of the seats. Aoun has denied this repeatedly.

Mikati said there was no blocking third in the government line-up.

(Reporting By Maha El Dahan; Writing by Tom Perry; Editing by Andrew Heavens, William Maclean)

Taiwan says strong typhoon may hit land this weekend

TAIPEI (Reuters) – Taiwan said on Friday typhoon Chanthu could make landfall this weekend, bringing strong winds and pouring rain in what would be the first typhoon to directly hit the island in two years.

Taiwan’s Central Weather Bureau said the storm was expected to skirt the island’s sparsely populated and mountainous east coast before touching down on its northeast corner late Sunday afternoon close to capital Taipei, and then head towards China’s Zhejiang province.

The Taiwanese transport ministry said a dozen domestic flights had already been cancelled, though there was no impact yet on international flights.

Tracking website Tropical Storm Risk forecast it would hit Taiwan as a category four typhoon, one level below a super typhoon, with winds of up to 250 km/h (156 mp/h), and then loose strength.

However, according to the Central Weather Bureau’s forecast, it is likely to keep far enough away from Taiwan’s globally important semiconductor factories on its west coast to avoid causing them damage, plants that provide the chips found in everything from smartphones to cars.

In 2009, floods and landslides caused by typhoon Morakot killed around 700 people in Taiwan, the deadliest storm to ever hit the island.

Subtropical Taiwan relies on the typhoon season to replenish its reservoirs, but after none hit the island last year water levels dropped drastically, leading to Taiwan’s worst drought in history and widespread water restrictions.

The drought ended after heavy rainfall in the late spring and early summer.

(Reporting by Ben Blanchard; editing by Philippa Fletcher)

Canada adds 90,200 jobs in August, unemployment falls to 7.1%

By Julie Gordon

OTTAWA (Reuters) – Canada added 90,200 jobs in August, slightly below expectations, while the unemployment rate dropped to 7.1%, its lowest point since the onset of the coronavirus pandemic, Statistics Canada data showed on Friday.

Analysts surveyed by Reuters had expected a gain of 100,000 jobs and for the unemployment rate to fall to 7.3%. With the August gain, employment is now less than 1% below pre-pandemic levels. Hours worked, however, remain 2.6% below February 2020 levels.

“The first glance is that it should be pretty decent with plus 90 (thousand),” said Andrew Kelvin, chief Canada strategist at TD Securities.

“The concerning bit is that hours worked were little changed through the month of August,” he said. That could be regarded as a disappointment by the Bank of Canada.

Full-time employment rose by 68,500, while part-time employment rose by 21,700. The service sector added 92,900 jobs, driven mostly by accommodation and food services, while goods sector employment fell by a net 2,600 jobs as losses in agriculture and other segments outweighed gains in construction.

The Canadian dollar was trading 0.6% higher at 1.2586 to the greenback, or 79.45 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith ; editing by Philippa Fletcher and Steve Orlofsky)