US ECONOMY & POLITICS

Fed’s Bostic Says No Need to Move Faster Than Half-Point Hikes – Bloomberg, 5/9/2022

• Federal Reserve Bank of Atlanta President Raphael Bostic said he favors policy makers continuing to raise rates by half-point increments rather than doing anything larger.
• A half-point hike ‘’is already a pretty aggressive move,” Bostic told Michael McKee in an interview on Bloomberg Television on Monday.
• “I don’t think we need to be moving even more aggressively. I think we can stay at this pace and this cadence and really see how the markets evolve.”
• While a number of economists have predicted Fed tightening to counter inflation would inevitably result in a U.S. economic recession, Bostic said he was a “worried optimist” and that today’s unique circumstances following a once-in-a-century pandemic made predictions especially difficult.
• Moreover, the U.S. just added more than 400,000 jobs last month, which would have been “a reason for celebration” in prior years, he said.

U.S. Targets Russian Media, Bank Executives With New Sanctions – Wall Street Journal, 5/9/2022

• The Biden administration announced new sanctions targeting Russian state-controlled media and banking executives, a ban on Americans providing accounting and management-consulting services and new export controls targeting the country’s industrial sector.
• The package will seek to clamp down on advertising dollars flowing into three Russian television stations, bar U.S. consulting firms from providing services to Russian companies seeking to evade sanctions and limit Russia’s access to industrial engines, motors and bulldozers.
• It also targets more than 2,600 Russian and Belarusian military, including personnel involved in alleged war crimes in Bucha.
• The U.S. also will sanction banking executives from Sberbank, the largest financial institution in Russia, and Gazprombank, a Russian bank that facilitates business by Russia’s Gazprom, one of the world’s largest natural-gas exporters, the administration said.
• The U.S. and its European allies have imposed a widening array of economic penalties on Russia in punishment for its invasion of Ukraine.

Pentagon’s China Warning Prompts Calls to Vet U.S. Funding of Startups – Wall Street Journal, 5/9/2022

• Congress may soon require government agencies to vet tech startups seeking federal funding, after a Defense Department study found China is exploiting a popular program that funds innovation among small American companies.
• The study, which was viewed by The Wall Street Journal, found China is using state-sponsored methods to target companies that have received Pentagon funding from the Small Business Innovation Research program.
• The April 2021 report, which has been circulating among lawmakers on Capitol Hill, details eight case studies it says have “national and economic security implications.”
• The studies include examples of program participants who dissolve their American companies, join Chinese government talent programs and continue their work at institutions that support the People’s Liberation Army, the armed wing of the Communist Party.
• The report also documents instances of SBIR recipients taking venture-capital money from Chinese state-owned firms and of working with Chinese entities that support the country’s defense industry.
• The report concludes that the SBIR program needs a due-diligence process to identify entities of potential concern that would then receive a more detailed review.

EUROPE & WORLD

China’s Trade Slows as Demand Drops and Covid Lockdowns Hit Supply Chains – Wall Street Journal, 5/9/2022

• China’s trade with the rest of the world withered in April as Covid-19 lockdowns shut factories and crippled supply chains, adding to signs of a broad slowdown in the world’s second-largest economy.
• China’s exports rose 3.9% from a year earlier in April, data from China’s customs bureau showed Monday, tumbling from 14.7% growth a month earlier.
• Imports were flat in April from a year earlier, easing from a 0.1% decline in March. That was a better performance than the 3% decline expected by the polled economists.
• Compared with March, however, exports fell 0.9% in April, while imports dropped 2.7%, highlighting the pinch on trade as lockdowns reached important cities like Shanghai.
• In a survey of 121 of its members conducted in late April and early May that was published Monday, the American Chamber of Commerce in China said more than half have delayed or reduced investment in China in response to the latest Covid-19 outbreaks and 58% expect revenue this year to be weaker than forecast.
• Almost 60% of those surveyed said they are still not operating at full capacity, citing staffing shortages and logistical difficulties.

‘Like a prison’: Shanghai, Beijing ratchet up COVID restrictions – Reuters, 5/9/2022

• China’s two largest cities tightened COVID-19 curbs on Monday, fueling public angst and even questions about the legality of its uncompromising battle with the virus that has battered the world’s second largest economy.
• In Shanghai, enduring its sixth week of lockdown, authorities have launched a new push to end infections outside quarantine zones by late May, according to people familiar with the matter.
• While there has been no official announcement, residents in at least four of Shanghai’s 16 districts received notices at the weekend saying they wouldn’t be allowed to leave their homes or receive deliveries, prompting a scramble to stock up on food.
• In a stark sign of the stresses for business, China’s auto association estimated that sales last month dropped a staggering 48% year-on-year as COVID restrictions shut factories and crimped domestic demand.
• China is adamant that it will stick to its zero-COVID policy to fight a disease that first emerged in the city of Wuhan in late 2019, warning against criticism of a policy they say is saving lives.

China Premier Warns of ‘Grave’ Jobs Situation Amid Lockdowns – Bloomberg, 5/9/2022

• Chinese Premier Li Keqiang warned of a “complicated and grave” employment situation as Beijing and Shanghai tightened curbs on residents in a bid to contain Covid outbreaks in the country’s most important cities.
• Li instructed all government departments and regions to prioritize measures aimed at helping businesses retain jobs and weather the current difficulties, according to a late Saturday statement, which cited the premier’s comments in a nationwide teleconference on employment.
• The premier’s warning on employment came after the nation’s surveyed jobless rate climbed to 5.8% in March, the highest since May 2020, according to data released by the National Bureau of Statistics.
• High-frequency indicators tracking jobs suggest a further deterioration in the labor market in April.
• Both Shanghai and Beijing increased restrictions on their residents Sunday to achieve the Covid Zero goal, with authorities in the financial hub stepping up efforts to quarantine close contacts of people testing positive for the virus.

Chinese Companies Boost Returns to Shareholders – Wall Street Journal, 5/9/2022

• Chinese companies like Alibaba Group Holding are embracing buybacks and one-off dividends, handing cash to shareholders as they seek to shore up their battered stock prices and signal confidence in the long-term outlook.
• As of May 5, 128 companies had bought back the equivalent of about $2.6 billion of stock in Hong Kong so far this year, more than double the tally in the same period a year earlier, Wind data show.
• The Wind figures reflect actual repurchases, rather than potential program totals. For all of 2021, the figure was nearly $5 billion, a record for the market.
• JD.com last week said it would pay a special cash dividend totaling about $2 billion to holders of its American depositary receipts and its Hong Kong-listed shares, after late last year boosting its existing buyback program to $3 billion. Meanwhile, the offshore oil giant Cnooc said on April 28 it would pay an anniversary special dividend of 1.18 Hong Kong dollars per share, or the equivalent of about $0.15. That is a sizable payout for a company whose stock closed the same day at HK$10.84 per share.
• Alibaba boosted its buyback program by $10 billion to a maximum of $25 billion in March. Others introducing or expanding similar plans include smartphone maker Xiaomi, fast-food giant Yum China Holdings, car maker BYD and smaller technology companies such as Bilibili, Vipshop Holdings and Weibo.

Russia’s Economy Facing Worst Contraction Since 1994 – Bloomberg, 5/9/2022

• Russia is facing the deepest economic contraction in nearly three decades as pressure from sanctions imposed by the U.S. and its allies mounts, according to an internal forecast by the Finance Ministry.
• Gross domestic product is likely to shrink as much as 12% this year, deeper than the 8% decline expected by the Economy Ministry, according to people familiar with the estimates who spoke on condition of anonymity to discuss internal deliberations.
• The Finance Ministry’s figure would put the economic pain on par with the turmoil seen in the early 1990s, when Russia’s Soviet-era economy lurched toward capitalism with a contraction not seen since wartime.
• If the Finance Ministry’s forecast proves accurate, that would erase about a decade of economic growth, according to one person familiar with the forecasts.

Sri Lanka prime minister resigns, curfew imposed after clashes – Reuters, 5/9/2022

• Sri Lanka’s prime minister resigned on Monday to make way for a unity government to try to find a way out of the country’s worst economic crisis in history, but protesters said they also wanted his brother to stand down as president.
• Prime Minister Mahinda Rajapaksa’s resignation came hours after clashes broke out in the commercial capital Colombo, where supporters of the ruling party stormed an anti-government protest camp and were beaten back by police using tear gas and water cannon.
• A nationwide curfew has been now been imposed, on top of the state of emergency that Sri Lankan President Gotabaya Rajapaksa – the prime minister’s younger brother – declared last week in the face of escalating protests.
• The island nation of 22 million people has suffered prolonged power cuts and shortages of essentials, including fuel, cooking gas and medicines, and the government is left with as little as $50 million of useable foreign reserves.

BioNTech’s Q1 vaccine sales triple but it still flags full-year decline – Reuters, 5/9/2022

• BioNTech’s first-quarter sales and earnings more than tripled thanks to demand for the COVID-19 vaccine it developed with Pfizer, but the German biotech firm is still forecasting a full-year decline in vaccine sales.
• Quarterly revenues more than tripled from a year earlier to 6.37 billion euros ($6.73 billion), as did net income, to 3.70 billion euros, the company said on Monday.
• BioNTech stood by its 2022 vaccine revenue guidance of 13 to 17 billion euros, down from 19 billion last year, implying a decline during the rest of the year.
• As previously, BioNTech based its guidance only on firm 2022 orders, which were unchanged at about 2.4 billion doses from a March estimate.

Factmonster – TODAY in HISTORY

• Mother’s Day became a public holiday. (1914)
• Fascist Italy annexed Ethiopia. (1936)
• The Beatles signed their first recording contract and hired George Martin to be their producer. (1962)
• The South African parliament chose Nelson Mandela as president. (1994)
• Chechnya’s Moscow-backed leader, Akhmad Kadyrov, was killed in a bombing. Six others were killed and another 60 wounded. (2004)