US ECONOMY & POLITICS

US Factory Output Surprises With First Decline in Four Months – Bloomberg, 6/17/2022

• US factory production unexpectedly declined in May for the first time in four months, restrained by ongoing supply challenges and hints of cooler demand for some big-ticket consumer goods.
• The 0.1% decrease followed 0.8% increases in the prior two months, Federal Reserve data showed Friday. Total industrial production, which also includes mining and utility output, rose 0.2% last month.
• Median forecasts in a Bloomberg survey of economists called for a 0.3% advance in factory output and a 0.4% gain in overall industrial production.
• Production of business equipment increased 0.3%, the smallest gain in four months. Output of consumer goods also cooled, rising just 0.1%.
• Motor vehicle output climbed 0.7% after sizable gains in the prior two months, further indicating semiconductor supply shortages are dissipating. Excluding autos, factory output fell 0.1%, the first drop since January.
• Capacity utilization at factories decreased to 79.1% from 79.2%, the Fed’s report showed.

White House Weighs Fuel-Export Limits as Pump Prices Surge – Bloomberg, 6/17/2022

• Top Biden administration officials are weighing limits on exports of fuel as the White House struggles to contain gasoline prices that have topped $5 per gallon.
• Discussions around capping gasoline and diesel exports have picked up in recent days, as President Joe Biden intensified his criticism of soaring oil company profits, said people familiar with the matter who asked for anonymity to describe private conversations.
• Limits under consideration would fall short of a complete ban on foreign sales of petroleum products, with gasoline exports averaging 755,000 barrels a day so far this year, according to the US Energy Information Administration. That’s up from 681,000 barrels a day during the same period in 2021.
• An export ban could conflict with other geopolitical priorities. Biden has repeatedly highlighted the US commitment to help ensure European allies have sufficient energy supplies amid the war in Ukraine.
• US restrictions on diesel exports to Europe could create new friction with allies overseas as they wean off of Russian supplies. And analysts have said export limits are unlikely to lower the price of gasoline in the long run.

Powell Says Fed ‘Acutely Focused’ on Returning Inflation to 2% – Bloomberg, 6/17/2022

• Federal Reserve Chair Jerome Powell reiterated his determination to curb the hottest inflation in 40 years and said the US central bank’s commitment encourages the world to hold and transact in dollars.
• “My colleagues and I are acutely focused on returning inflation to our 2% objective,” he said in welcoming remarks Friday to a Fed conference on the international role of the dollar in Washington. “The Federal Reserve’s strong commitment to our price-stability mandate contributes to the widespread confidence in the dollar as a store of value.”
• The central bank later reinforced that message via its semi-annual monetary report to Congress, stating the policy-setting “committee’s commitment to restoring price stability — which is necessary for sustaining a strong labor market — is unconditional.”
• Powell suffered a solitary dissent in Wednesday’s policy vote, though it came from an unexpected source: Kansas City Fed chief Esther George, who cast the first dovish dissent of her career.
• In a statement explaining her decision later on Friday, she said that she voted against the 75 basis point increase “ because I viewed that move as adding to policy uncertainty simultaneous with the start of balance sheet runoff.”
• Minneapolis Fed President Neel Kashkari said that while he supported Wednesday’s move and could back one of the same size next month, uncertainty about how much tightening raises caution about too much more front-loading.

U.K. Approves Julian Assange’s Extradition to U.S. – Wall Street Journal, 6/17/2022

• WikiLeaks founder Julian Assange can now be extradited from the U.K. to the U.S. to face espionage charges after British Home Secretary Priti Patel approved the order.
• A London court authorized Mr. Assange’s extradition in April, overturning an earlier decision that had barred it on the grounds that he would be a suicide risk if held in harsh conditions in a U.S. jail while awaiting trial.
• Mr. Assange, 50 years old, is wanted in the U.S. on 18 counts of conspiring to disclose classified information and conspiring to hack a military computer.
• The alleged offenses relate to the publication in 2010 and 2011 by WikiLeaks of a huge trove of classified material that painted a bleak picture of the American campaigns in Iraq and Afghanistan, and their aftermath.
• WikiLeaks called the decision “politically motivated” in a statement posted to Twitter Friday. “This is a dark day for Press freedom and for British democracy,” it said.
• Amnesty International criticized the extradition decision, warning that Mr. Assange faced a high risk of being kept in prolonged solitary confinement.“Allowing Julian Assange to be extradited to the U.S. would put him at great risk and sends a chilling message to journalists the world over,” a spokesman said.
• “Diplomatic assurances provided by the U.S. that Assange will not be kept in solitary confinement cannot be taken on face value given previous history.”

EUROPE & WORLD

Russia Squeezes Gas Supply to Europe’s Biggest Buyers – Bloomberg, 6/17/2022

• Russia tightened the squeeze on its biggest European gas customers, putting the continent on high alert for fuel shortages as Brussels accused the Kremlin of blackmail.
• Russia has been stepping up the use of energy as weapon, first cutting gas supplies to smaller buyers like Bulgaria, Poland, Denmark and the Netherlands. But the country — which prided itself on being a reliable partner to Europe even during the Cold War — has started cutting shipments even to countries that bowed to President Vladimir Putin’s demand to pay for gas in rubles.
• Russia slashed supplies to Germany, France, Austria and Italy, prompting a surge of as much as 63% in gas prices this week. Dutch benchmark futures are more than triple usual levels for this time of year.
• The continent’s top buyer of Russian gas — German energy giant Uniper SE — said it’s receiving 60% less gas than ordered from Russia after Moscow limited supplies via its biggest pipeline to Europe.
• Uniper relies on Russia for more than half of the natural gas it needs under long-term contracts, with some of them expiring in the 2030s.
• Flows through the important Nord Stream pipeline were cut by 60%, with Italy’s Eni SpA and France’s Engie SA also saying they’re receiving less of the fuel.

Japan’s Kuroda Says He Won’t Raise Rates, Even With Weak Yen – Wall Street Journal, 6/17/2022

• Central banks around the world are raising interest rates rapidly, except one. The Bank of Japan affirmed Friday that it wanted rates around zero, even if investors are using that as a reason to sell the yen.
• “It is not appropriate to tighten monetary policy at this point,” said Gov. Haruhiko Kuroda. “If we raise interest rates, the economy will move into a negative direction.”
• Japan’s outlier status partly reflects its less-serious inflation problem—prices rose 2.5% overall in April, compared with more than 8% recently in the U.S. and 9% in the U.K. Core prices excluding volatile fresh food and energy rose only 0.8% in Japan in April.
• Tokyo policy makers are also concerned that tightening credit conditions, while possibly useful in lifting the yen, would choke off still-sluggish economic growth.
• Japan’s main policy rates all remain around zero. The Bank of Japan continues to target a negative short-term rate of minus 0.1%, and it has imposed a firm cap of 0.25% on the yield of the 10-year Japanese government bond by promising to buy unlimited quantities of those bonds.

Ukraine’s Farmers, Contending With Stolen Grain and Mined Fields, Now Say Land Is Being Seized – Wall Street Journal, 6/17/2022

• Moscow’s invasion of Ukraine has captured some of the most productive agricultural land in what is one of the world’s great breadbaskets, disrupting supplies and pushing up food prices.
• Russian forces have also stolen grain and equipment, the Ukrainian government and farmers say.
• Now, entire farms are being taken, some farmers say.
• That allegation of land theft is becoming increasingly common in parts of Ukraine occupied by Russian forces, heaping more misery upon the country’s beleaguered farming industry and threatening to crimp harvests when the world needs Ukrainian crops.
• Farmers say groups showing up at the farm gate have identified themselves variously as Russians, fighters in Ukraine helping the Russians and representatives of Ukraine’s pro-Kremlin breakaway regions.
• Overall, the Ukrainian government has accused Russia of stealing around 400,000 metric tons of grains and seeds. Ukraine has also accused Russia of deliberately trying to hurt its farming sector, which generated about 22% of the country’s gross domestic product last year, according to United Nations data.
• A study by the Kyiv School of Economics released Wednesday estimated that the invasion has cost Ukraine’s farming sector $4.3 billion in destroyed equipment, damaged land and unharvested crops.

EU Opens Membership Path for Ukraine – Wall Street Journal, 6/17/2022

• The European Union opened the way for Ukraine to one day join the bloc, taking a significant step toward one of the central demands of Ukrainian President Volodymyr Zelensky, who says an accession path will help his country turn back the Russian invasion.
• The European Commission, the EU’s executive body, recommended that member states make Ukraine—as well as Moldova—a candidate for EU membership, the first step of what could be a decadeslong process to join the bloc.
• EU leaders are set to meet in Brussels next week to decide whether to approve the commission’s recommendation.
• The EU has also sent divergent messages over how it sees the Ukraine conflict ending. While Poland, the Baltic states and some others see a Ukrainian victory over Russia as key to deterring future Russian aggression, France and Germany have been warning of the need to avoid humiliating Russia and setting the stage for negotiations between Moscow and Kyiv that could deliver a cease-fire and eventually settle the conflict.
• Support for EU membership could allow the bloc a way to swing behind Ukraine without deepening some of those divisions. Yet next week’s summit also holds the potential to further expose them.

China Launches Third Aircraft Carrier, Advancing Naval Ambitions – Wall Street Journal, 6/17/2022

• China has launched its third aircraft carrier, its largest and most sophisticated to date, advancing its ambitions to build a modern oceangoing navy that can project power around the globe.
• Christened the Fujian, after the coastal province that sits closest to the island democracy of Taiwan, the new carrier entered the waters at Shanghai’s Jiangnan Shipyard during a launch ceremony on Friday attended by Gen. Xu Qiliang, a member of China’s 25-member Politburo and vice chairman of the Communist Party’s Central Military Commission, which commands the armed forces, according to state media reports.
• The Fujian is China’s first indigenously designed and built aircraft carrier, displacing more than 80,000 tons when fully loaded and equipped with electromagnetic catapults for launching aircraft.
• The vessel will undergo mooring tests and sea trials, according to the government-run Xinhua News Agency, which didn’t elaborate.
• The Fujian offers greater operational capability with its electromagnetic catapult system, but the vessel is nonetheless smaller and deemed by some Western military experts as likely to be less capable than American carriers of the Nimitz and Gerald R. Ford classes, which can carry more aircraft and sail far longer without refueling.

Factmonster – TODAY in HISTORY

• The Battle of Bunker Hill took place during the American Revolution. (1775)
• The Statue of Liberty arrived in New York City aboard the French ship Isere. (1885)
• Amelia Earhart embarked on the first trans-Atlantic flight by a woman. (1928)
• U.S. Supreme Court ruled that no locality may require recitation of Lord’s Prayer or Bible verses in public schools. (1963)
• Burglary of Democratic Party headquarters in Washington, DC, started the Watergate political scandal. (1972)
• O. J. Simpson’s slow-speed chase by the police, watched by millions on TV, ended in his arrest. (1994)