US ECONOMY & POLITICS

Russia to Face U.S. in Rare U.N. Security Council Debate – Wall Street Journal, 1/31/2022

• The United Nations Security Council will use a meeting Monday to seek a diplomatic exit to the situation on the Ukrainian border and to request an explanation from Russia about its buildup of troops there, the U.S. ambassador to the U.N. said.
• The U.S. called the meeting last week to discuss the standoff over Ukraine, seeking to apply international pressure on Russia to negotiate its concerns about European security among diplomats rather than on the battlefield.
• A senior Russian diplomat on Friday dismissed the meeting as a shameful public-relations stunt and urged the council not to support it.
• The U.N. meeting will be a rare opportunity for Washington and its allies to discuss the actions of another permanent Security Council member—Russia—on the world stage. After weeks of negotiation behind closed doors, the debate on Monday is set to occur in an open meeting and in front of television cameras.

Senate Nears Completion of Measures Targeting Russian Economy in Event of Ukraine Invasion – Wall Street Journal, 1/31/2022

• Bipartisan legislation aimed at striking the Russian economy if President Vladimir Putin invades Ukraine is nearing completion in the U.S. Senate, key senators said Sunday.
• The legislation under negotiation among members of the Senate Foreign Relations Committee and others would target major Russian banks, hit Russians’ savings and pensions and limit the market for Russia’s sovereign debt, among other elements, Chairman Sen. Bob Menendez (D., N.J.) said Sunday.
• The legislation appears to reflect measures being considered by President Biden’s administration, which administration officials said would target several of Russia’s largest government-owned banks, ban trade in new issues of Russian sovereign debt and apply export controls across key sectors.
• Sen. Lindsey Graham (R., S.C.) predicted bipartisan support for further and more-severe sanctions against Russia, as well as additional defensive weaponry for Ukraine.
• Summarizing his own preferences Sunday on CBS, he said: “More. More against Russia, more for Ukraine.”

EUROPE & WORLD

China’s Economy Starts the Year With a Wobble – Wall Street Journal, 1/31/2022

• The Chinese economy started the year on an uncertain footing, as Covid-19 flare-ups disrupted factory activity and consumer spending, according to a trio of manufacturing and service sector surveys released Sunday.
• Two gauges of Chinese manufacturing activity—one official and one private—each retreated in January, while a third measure, of the country’s services sector, brought into relief the deep toll that the latest burst of coronavirus infections has inflicted on domestic demand.
• China’s official manufacturing purchasing managers index fell to 50.1 in January, the National Bureau of Statistics said, down from 50.3 in December and just above the 50 mark that separates activity expansion from contraction.
• However, the subindex measuring total new orders fell deeper into contraction, dropping to 49.3 in January, while new export orders improved to 48.4 in January—still in contractionary territory.
• Factory production in January weakened to 50.9 and would likely have been even softer if not for an acceleration in the production of consumer goods ahead of the Lunar New Year holiday that begins on Feb. 1, the statistics bureau said.
• Meanwhile, the Caixin China manufacturing PMI, a private gauge that is more focused on small private businesses than the official manufacturing index—which is weighted more toward large state-owned enterprises—tumbled to 49.1 in January, its lowest level since February 2020, at the height of the initial Covid-19 outbreak in China.
• The steep drop in the Caixin manufacturing PMI, from a reading of 50.9 in December, came as the subindexes for output and total new orders dropped to their lowest levels since August, Caixin said.
• China’s official nonmanufacturing PMI, which includes both services and construction activity, fell to 51.1 in January from December’s 52.7, the statistics bureau said Sunday.
• The subindex measuring services activity dropped to 50.3 in January, the lowest level in five months, from December’s 52.0, dragged down by coronavirus outbreaks across the country.
• The subindex measuring construction activity also weakened to 55.4 in January, from 56.3 the previous month, as weather conditions and the homeward journeys of construction workers for the Lunar New Year festival took their toll, the statistics bureau said.

European Businesses Ride Out the Omicron Wave – Wall Street Journal, 1/31/2022

• The impact of Omicron in Europe has been more muted than previous Covid-19 waves, as governments responded to each successive surge of the virus with a lighter touch. Meanwhile individuals and businesses have, where possible, adapted to restrictions, minimizing the effects.
• The eurozone economy expanded 0.3% in the fourth quarter of last year, well below the 4.6% for the entire year, Eurostat said on Monday. The U.K. economy is forecast to have grown by 1.2% in the fourth quarter, according to the National Institute of Economic and Social Research.
• With the effects of the Omicron variant coming late in the year, most European economies booked strong growth overall in 2021. The French economy grew more than any year since 1969.
• Italy had its best showing in more than 40 years, while Germany grew a relatively modest 2.7% as supply-chain problems hit the country’s manufacturing sector particularly hard.

Japan’s factory output dips more than expected as risks emerge – Reuters, 1/31/2022

• Japan’s factory output shrank for the first time in three months in December as a decline in machinery production outweighed a small rise in autos, casting a cloud over the strength of the economic recovery.
• Factory output lost 1.0% in December from the previous month, official data showed on Monday, pulled down by a decline in output of general-purpose and production machinery, including chip-making equipment and engines used in manufacturing.
• That meant that output, which fell faster than the 0.8% decline forecast in a Reuters poll of economists, dropped for the first time in three months.
• The data showed output growth of cars and other vehicles slowed to 1.5% from the previous month in December, much weaker than the 43.7% surge in November and a 15.9% jump in October.
• Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to grow 5.2% in January and 2.2% in February.
• Separate data showed retail sales rose 1.4% in December from a year earlier, smaller than the expected 2.7% rise.

Evergrande Faces Forced Sale of Hong Kong Land It Pledged for Loan – Wall Street Journal, 1/31/2022

• Receivers have been appointed over land in Hong Kong that China Evergrande used as collateral for a $520 million loan, but the sale of the plot won’t affect the company’s broader restructuring, the troubled developer said.
• Evergrande was notified Wednesday about the move, which relates to a plot of undeveloped residential land located in Yuen Long, the property company said in a filing late Sunday in Hong Kong. It didn’t name the lender.
• The creditor is Los Angeles-based distressed-debt manager Oaktree Capital Management, which used the land as collateral for a secured loan it extended to Evergrande, a person familiar with the matter said.
• Because Oaktree lent on a secured basis, it has control over the collateral in the case of a default, and is able to appoint a receiver to sell the asset and recoup what it is owed.

German Inflation Down Less Than Forecast, Challenging ECB Stance – Bloomberg, 1/31/2022

• German inflation slowed significantly less than expected in January, challenging the European Central Bank’s view that consumer-price growth in the euro area will ease noticeably this year and preclude the need for tighter policy.
• Prices rose 5.1% from a year ago under a European Union-harmonized measure, the Federal Statistics Office said Monday.
• That’s well above the 4.3% forecast by economists in a Bloomberg survey, and comes after a reading of 5.7% in December.
• Energy was 20.5% more expensive, the data showed.
• Earlier on Monday, Spain also reported inflation far above analysts’ estimates.
• France will publish data on Tuesday, before figures for Italy and the 19-nation euro area come out on Wednesday.
• “We need to ask ourselves if this is a permanent inflation development — we need to keep expectations anchored that prices will remain stable,” German Finance Minister Christian Lindner said on German television channel ARD earlier on Monday.

JLR owner Tata Motors posts quarterly loss, warns of higher costs – Reuters, 1/31/2022

• Jaguar Land Rover owner Tata Motors reported a quarterly loss on Monday that was bigger than expected and warned of rising inflationary costs.
• Total revenue from operations for the quarter fell 4.5% to 722.29 billion rupees, below estimates of 775.93 billion rupees.
• Tata Motors’ earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, a key measure of profitability, was 10.2% for the quarter, above estimates of 9.3%.
• Tata Motors’ consolidated net loss came in at 15.16 billion rupees ($203.23 million) for the quarter ended Dec. 31, compared to a profit of 29.06 billion rupees a year earlier, when an easing of pandemic-related restrictions led to a pick-up in sales.
• The company expects chip shortages at JLR to continue through 2022 as suppliers gradually ramp up production, and is also engaging directly with chip manufacturers to secure supply longer-term supplies for the Range Rover maker, it said.

Ryanair sees very strong summer if no COVID setback – Reuters, 1/31/2022

• Ryanair expects huge pent-up demand to lead to record summer passenger numbers and higher ticket prices if the recovery is not thrown off course by a new COVID variant, Group Chief Executive Michael O’Leary said on Monday.
• But he said the budget airline’s outlook remained uncertain and it was currently cutting fares aggressively to try to restore passenger numbers to pre-pandemic levels by March.
• O’Leary was speaking to investors after Ryanair reported a loss of 96 million euros ($107 million) for the final three months of 2021, in line with a consensus estimate of a 101 million euros loss in a company poll of analysts.
• The Irish airline, Europe’s largest by passenger numbers, reiterated its forecast for a loss of between 250 million and 450 million euros for its full financial year ending March 31.
• Ryanair’s aircraft should be almost 90% full by April and above that level in the summer, O’Leary said.
• The airline has said it is profitable when occupancy reaches 80%.
• Ryanair expects to fly 14% more capacity this summer than in the same season of 2019, and will carry a record 165 million passengers in the year to March 2023 up from just under 100 million in the current year and a pre-COVID record of 149 million.

Boris Johnson’s Downing Street Criticized in Report Over Parties During Lockdowns – Wall Street Journal, 1/31/2022

• A British government report said multiple parties held in Downing Street during Covid-19 lockdowns were a failure of leadership and shouldn’t have happened, leaving Prime Minister Boris Johnson fighting to quell a rebellion within the ranks of his Conservative Party.
• The short report, compiled by senior civil servant Sue Gray, outlined several social events that took place in government offices over the past two years during times when ordinary Britons were ordered to avoid or reduce socializing.
• Ms. Gray said there was a “serious failure” to observe the high standards expected in government. “Some of the events should not have been allowed to take place. Other events should not have been allowed to develop as they did,” she said.
• The civil servant said she was tasked with investigating 16 cases where parties are alleged to have happened on government premises. Ms. Gray shared her findings with the British police, who are also probing the matter and will determine whether Mr. Johnson or other Downing Street officials broke the law.
• Downing Street has said several parties were held during lockdowns, for which Mr. Johnson has apologized and said that he thought at least one of the gatherings he attended, a drinks party in May 2020, was a work event.
• To trigger a confidence ballot, 54 lawmakers need to send letters to a special Conservative Party committee. If that threshold is reached, more than half of the Tories’ 359 lawmakers would need to vote against Mr. Johnson for him to be removed from office.

Trudeau Tests Positive for Covid, Says He’ll Work Remotely – Bloomberg, 1/31/2022

• Canadian Prime Minister Justin Trudeau said he has tested positive for Covid-19, four days after going into isolation because one of his children contracted the virus.
• News of Trudeau’s positive test comes as Canada’s legislature resumes work Monday after being on winter break since mid-December.
• The prime minister’s announcement also comes as a line of big rigs continues to blockade the main avenue outside parliament. A trucker convoy that has attracted global attention arrived in Ottawa over the weekend, and was joined by a wide range of activists to protest vaccine mandates and Covid health restrictions in general.
• Although most demonstrators appear to have now left Ottawa, a core of protesters and trucks has remained and organizers say they won’t leave until all vaccine mandates are removed.
• The protest has been non-violent, but Ottawa police have warned residents to avoid the downtown core until the streets are clear again.

Factmonster – TODAY in HISTORY

• Guy Fawkes, a co-conspirator in the Gunpowder Plot, was executed. (1606)
• Robert E. Lee was appointed commander-in-chief of the Confederate forces. (1865)
• The first U.S. earth satellite, Explorer I, was launched. (1958)
• The first McDonald’s opened in Russia. (1990)