US ECONOMY & POLITICS

U.S. Services Gauge Falls to One-Year Low as Orders Soften – Bloomberg, 3/3/2022

• Growth in the U.S. services sector retreated in February to a one-year low as orders softened along with business activity, an indication supply constraints remain a hurdle for the economy.
• The Institute for Supply Management’s gauge of services fell 3.4 points to 56.5, below even the most pessimistic estimate in a Bloomberg survey of economists, according to data released Thursday. Readings above 50 signal expansion.
• The group’s index of new orders also showed the slowest growth in a year, while a measure of business activity — which parallels the ISM’s gauge of factory production — fell to the lowest level since May 2020. Moreover, an index of employment contracted.
• The overall ISM measure has fallen three straight months and is down almost 12 points from a series peak in November, before a pickup in coronavirus infections stifled activity.
• The group’s gauge of services employment fell almost 4 points to 48.5, the weakest since August 2020, which may indicate a combination of lingering omicron effects and firms’ difficulty hiring and retaining workers.
• The ISM’s index of supplier delivery times rose to a three-month high. A measure of unfilled orders climbed 6.8 points in February, the largest one-month advance in two years.
• A measure of prices paid for materials edged up to 83.1, near the highest on record. Commodities prices continue to rise, triggered by Russia’s invasion of Ukraine that threatens to fuel inflation further.

U.S. factory orders growth beats expectations in January – Reuters, 3/3/2022

• New orders for U.S.-made goods increased more than expected in January, pointing to continued strength in manufacturing despite supply challenges.
• The Commerce Department said on Thursday that factory orders rose 1.4% in January.
• Data for December was revised sharply higher to show orders gaining 0.7% instead of falling 0.4% as previously reported.
• Economists polled by Reuters had forecast factory orders would rebound 0.7%.
• Shipments of manufactured goods increased 1.2% in January after rising 0.7% in December.
• Inventories at factories increased 0.7%. Unfilled orders rose 0.9% after advancing 0.8% in the prior month.
• The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 1.0% in January instead of 0.9% as reported last month.
• Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased at an unrevised 1.9% rate in January.

U.S. Jobless Claims Fell to 215,000, Remaining Near Historic Lows – Wall Street Journal, 3/3/2022

• New applications for unemployment benefits edged lower and remained near historically low levels as the labor market stays tight following a decline in Covid-19 cases.
• Initial jobless claims, a proxy for layoffs, fell by 18,000 to a seasonally-adjusted 215,000 for the week ended Feb. 26, down from the revised 233,000 the week before, the Labor Department said Thursday. The four-week average, which smooths out volatility, fell to 230,500.
• Continuing claims, a proxy for the total number of people on unemployment rolls through regular state programs, ticked up by 2,000 to 1,476,000 for the week ended Feb. 19. The four-week moving average of continuing claims that week fell to 1,539,500, the lowest since April 1970.

Fed’s Powell to Discuss Rate-Rise Plans With Senate Lawmakers – Wall Street Journal, 3/3/2022

• Federal Reserve Chairman Jerome Powell returned to Capitol Hill on Thursday morning for the second of two days of testimony, this time before the Senate Banking Committee.
• Before a House panel on Wednesday, Mr. Powell offered an unusually explicit preview of anticipated policy action when he said he would propose a quarter-percentage-point interest-rate increase at the central bank’s meeting in two weeks amid high inflation, strong economic demand and a tight labor market.
• Mr. Powell said Wednesday that before Russia’s invasion of Ukraine last week, he expected the central bank would follow that initial rate rise with a series of increases this year.
• “For now, I would say that we will proceed carefully along the lines of that plan,” Mr. Powell told the House Financial Services Committee. “We’re going to avoid adding uncertainty to what is already an extraordinarily challenging and uncertain moment.”
• While he said it was too soon to say how the war and heavy sanctions imposed by the West against Moscow would influence the U.S. economy, he revealed a general urgency to continue tightening policy.
• Mr. Powell effectively ended a debate in markets and among other Fed officials over whether they would lift rates from near zero this month with a larger half-percentage-point increase.
• At the same time, he laid the groundwork for the possibility of half-point increases this summer, pushing back against the idea that more traditional quarter-point increases represent a speed limit for the Fed.

Biden Administration Seeks $10 Billion for Ukraine Aid – Wall Street Journal, 3/3/2022

• The Biden administration has increased to $10 billion the amount of money it is seeking immediately from Congress in aid for Ukraine and Eastern European partners, writing that it wants the money wrapped into a spending bill that Congress aims to pass by next week.
• The request came in a letter from the White House Office of Management and Budget that was dated March 2.
• The White House had previously sought $6.4 billion, although appropriators had anticipated that the amount would likely rise.
• The letter said the funding would be used for additional defense equipment for Ukraine, emergency food assistance, sanctions enforcement, and additional support for U.S. troop deployments to neighboring countries, among other priorities.
• The White House also asked for $22.5 billion in coronavirus response funding, which it said was required for immediate needs for tests, treatments and vaccines.

Biden Expected to Ban Russian Ships From Entering U.S. Ports – Wall Street Journal, 3/3/2022

• The Biden administration is expected to ban Russian-flagged ships from entering U.S. ports, according to officials familiar with the matter, extending sanctions against the country following its invasion of Ukraine.
• The move, which follows a similar ban in the U.K., would be largely symbolic. Russian commercial ships represent less than 1% of cargo volumes to the U.S., according to shipping and port officials. Russian firms own a large fleet of oil tankers but they usually aren’t Russian-flagged.
• Russian ships have been banned from U.K. ports, part of a fresh raft of sanctions announced by Britain on Tuesday.
• That ban includes any vessels owned or operated by anyone connected to Russia and gives authorities new powers to detain Russian vessels.

China Snaps Up U.S. Corn and Soybeans as Ukraine War Roils Trade – Bloomberg, 3/3/2022

• China is scooping up U.S. corn and soybeans as part of efforts to mitigate the risks to commodity supplies from Russia’s war in Ukraine and slower harvests in South America.
• Chinese buyers recently booked about 20 cargoes of American soybeans and about 10 shipments of corn, according to traders who asked not to be identified as they aren’t authorized to speak publicly.
• The buying spree reflects robust demand in the top importer as worries over supplies grow following Russia’s invasion of Ukraine and weaker-than-expected supply from Brazil, the world’s biggest soybean producer.
• Russia and Ukraine are among the biggest exporters of major grains like wheat and corn, and also vegetable oils used in cooking. As shipments from the two countries grind to a virtual standstill, prices of many agricultural commodities have soared.
• China is a major buyer of corn and barley from Ukraine, as well as sunflower oil from both Ukraine and Russia.

EUROPE & WORLD

Russian Forces Advance in Southern Ukraine Ahead of Cease-Fire Talks – Wall Street Journal, 3/3/2022

• Russia deepened its military offensive in southern Ukraine, penetrating the city of Kherson and pushing toward Zaporizhya, as the two sides prepared to resume cease-fire talks after Moscow’s week-old incursion stalled in the north of the country.
• Russian forces Thursday continued pounding residential districts in Kharkiv, Ukraine’s second-largest city, and Chernihiv in the north.
• Moscow also conducted airstrikes on the capital, Kyiv, and several Russian warships appeared near the southern port city of Odessa in what Ukrainian officials said could be the opening stages of an amphibious assault.
• Seizing Odessa and other coastal cities that remain under Kyiv’s control would deprive Ukraine of its Black Sea coast and the ports through which most of the country’s exports are shipped.
• Ukrainian forces have managed to stymie Russia’s advance on Kyiv and Kharkiv, and have even retaken some areas in a counteroffensive northwest of the capital, according to government statements and video footage.
• Strong resistance from Ukraine, however, has pushed the Kremlin to shift to a strategy of indiscriminate attacks, shelling civilian areas in an attempt to demoralize Ukraine’s population.

China Asked Russia to Delay Ukraine War Until After Olympics, U.S. Officials Say – The New York Times, 3/3/2022

• A Western intelligence report said senior Chinese officials told senior Russian officials in early February not to invade Ukraine before the end of the Winter Olympics in Beijing, according to senior Biden administration officials and a European official.
• The report indicates that senior Chinese officials had some level of direct knowledge about Russia’s war plans or intentions before the invasion started last week.
• President Vladimir V. Putin of Russia met with President Xi Jinping of China in Beijing on Feb. 4 before the opening ceremony of the Olympics. Moscow and Beijing issued a 5,000-word statement at the time declaring that their partnership had “no limits,” denouncing NATO enlargement and asserting that they would establish a new global order with true “democracy.”
• Days after President Biden spoke to Mr. Xi in a video summit on Nov. 15, senior American officials decided to present intelligence on the Russian troop buildup around Ukraine to senior Chinese officials to try to get them to persuade Mr. Putin to stand down.
• After one diplomatic exchange in December, U.S. officials received intelligence showing Beijing had shared the information with Moscow, telling the Russians that the United States was trying to sow discord and that China would not try to impede Russian plans, American officials said.

EU Seeks to Suspend Russia’s Most-Favored Nation Status at WTO – Bloomberg, 3/3/2022

• The European Union is seeking to remove Russia’s most-favored nation status at the World Trade Organization, a move that could further hit 95 billion euros ($105 billion) of Moscow’s exports to the bloc with tariffs.
• The European Commission, the EU’s executive arm, is discussing the possibility with member states, according to commission spokeswoman Miriam Garcia Ferrer.
• The sanctions already imposed by the EU have closed off a significant portion of financial and trade ties with most European companies.
• Ending most-favored nation status would increase costs via tariffs for any EU companies still doing business with Russia.

U.N. Report Shows Iran Has Almost Enough Highly Enriched Uranium for a Nuclear Bomb – Wall Street Journal, 3/3/2022

• Iran significantly increased its stockpile of highly enriched uranium, moving closer than ever to having enough near-weapons grade material for a nuclear weapon, the U.N. atomic agency reported on Thursday as talks to restore the 2015 nuclear deal reach a critical point.
• In a confidential report circulated to members, the International Atomic Energy Agency reported that as of Feb. 19, Iran has 33.2 kilograms of 60% enriched material, up from 17.7 kilograms in early November when the agency last reported. It is the most highly enriched uranium ever recorded for Iran.
• Iran would need around 40 kilograms of 60% enriched uranium to produce enough weapons-grade nuclear fuel for a weapon. Iran says its nuclear program is for purely peaceful purposes.
• The report comes with negotiators from the U.S., Iran, Britain, France, Germany, Russia and China, locked in round-the-clock meetings in Vienna to try to reach a deal on restoring the 2015 nuclear deal, which lifted most international sanctions on Iran in exchange for tight but temporary restrictions on its nuclear program.

Venezuela Asks Wall Street to Help Lift U.S. Sanctions so Oil Can Flow – Wall Street Journal, 3/3/2022

• With energy prices soaring because of war in Ukraine, Wall Street firms and other U.S. investors are seeing an opening to press the Biden administration to lift sanctions against a potentially major Western Hemisphere producer of crude, Venezuela.
• Venezuela’s regime, anxious to regain access to international credit and attract foreign investment to get a feeble economy going again, has been quietly sweetening the pot for Wall Street bondholders so they help persuade the Biden administration to start removing sanctions.
• Though President Nicolás Maduro’s close relationship with Moscow could spoil bridge-building efforts, the Biden administration is wary of the impact of rising oil prices on gasoline pumps at home.
• The State Department declined to comment.

Coupang Losses Widen on Soaring Costs to Fend Off Rivals – Bloomberg, 3/3/2022

• Coupang, South Korea’s leading e-commerce company, reported a wider loss in the fourth quarter as the company continued to aggressively spend on infrastructure and services in the face of intensifying competition.
• Sales rose 34% to $5.1 billion, while the number of active clients increased 21%.
• The net loss was $405 million in the period.
• The company said on Thursday that it had about 9 million paid Wow members at the end of last year.
• As part of its effort to boost earnings, Coupang increased the monthly cost of its Wow subscription for new members to 4,990 won ($4.15).
• Although the hike only applies to customers who join from this year, analysts expect it will eventually also be levied on current members.

Saudi crown prince plays the oil card in quest for U.S. recognition – Reuters, 3/3/2022

• Saudi Arabia’s crown prince says he simply doesn’t care whether Joe Biden misunderstands him.
• The prince is instead looking to his oil power to deliver his goals, according to sources familiar with Riyadh’s thinking: recognition from the American president that he’s the real ruler of the kingdom and a stronger hand in the costly Yemen war.
• That’s one reason why Crown Prince Mohammed bin Salman is resisting U.S. pressure to pump more crude to lower the price of oil that has surged since Russia attacked Ukraine, besides keeping Riyadh’s oil pact with Moscow alive, the sources said.
• “The Saudis have demands too, before they meet any of the U.S. requests. The Yemen file and the recognition of the crown prince as the de facto ruler are on top of these,” one of the sources familiar with Saudi government thinking told Reuters.
• Traditionally strong ties between Riyadh and Washington were shaken when Biden released a U.S. intelligence report implicating Prince Mohammed in the 2018 murder of journalist Jamal Khashoggi and ended U.S. support for offensive operations in Riyadh’s costly war against Iran-aligned Houthis in Yemen.

Factmonster – TODAY in HISTORY

• Germany, Austria, and Russia signed the Treaty of Brest-Litovsk. (1918)
• The “Star-Spangled Banner” was adopted as the national anthem. (1931)
• Rodney King’s vicious beating by Los Angeles police officers was caught on videotape. (1991)
• Former dictator Augusto Pinochet returned to Chile after being detained in Britain on torture charges. (2000)
• New embassies opened in Kenya and Tanzania, to replace those lost in the 1998 terrorist bombings. (2003)