US ECONOMY & POLITICS

Powell Signals Fed Will Raise Rates If Needed, Keep Them High – Bloomberg, 8/25/2023

• Federal Reserve Chair Jerome Powell said the US central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is on a convincing path toward the Fed’s 2% target.
• “Although inflation has moved down from its peak — a welcome development — it remains too high,” Powell said in the text of a speech Friday at the US central bank’s annual conference in Jackson Hole, Wyoming.
• “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”
• However, he cautioned that the process “still has a long way to go, even with the more favorable recent readings.”
• “Given how far we have come, at upcoming meetings we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks,” he said.
• The remarks were in line with Powell’s character and communication for all of 2023: He is singularly focused on the mission of restoring price stability, and further tightening remains on the table to get back to 2% if necessary.
• “Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said.

US Consumer Year-Ahead Inflation Expectations Rise on Gasoline – Bloomberg, 8/25/2023

• US consumers’ year-ahead inflation expectations picked up in August to a three-month high as gasoline prices increased, weighing on sentiment.
• Consumers expect prices will climb at an annual rate of 3.5% over the next year, up from the 3.4% expected in July, according to the final August reading from the University of Michigan.
• They see costs rising 3.0% over the next five to 10 years, matching the prior two months, data Friday showed.
• As a result, the sentiment index retreated to 69.5 from an almost two-year high of 71.6 in July.
• The latest reading compares with a 71.2 median estimate in a Bloomberg survey of economists.
• The report showed a larger share of consumers “spontaneously” mentioned high fuel prices late in the month.
• However, they don’t anticipate bigger increases in the cost of gasoline during the coming year.
• Moreover, the smallest share of respondents since October 2021 said they expect inflation to exceed their income growth in the year ahead.
• Combined with still-solid views of the job market, that signals a possible increase in optimism about future business conditions.
• Buying conditions for durable goods and expectations of personal finances improved this month to the highest levels in two years.
• The current conditions gauge eased to 75.7 from 76.6. A measure of expectations fell to 65.5 this month from 68.3 in July.

Trump’s Mug Shot Released After Former President Surrenders in Georgia – Wall Street Journal, 8/25/2023

• Trump hasn’t yet entered a plea in the Georgia case. Fulton County District Attorney Fani Willis has said she wanted defendants to be arraigned in early September.
• Speaking on the tarmac next to his private plane before departing Atlanta, Trump called his booking a sad day for America and repeated his false claim that the election was rigged.
• “I did nothing wrong,” he said. “What they are doing is election interference.”
• Trump’s campaign moved quickly to capitalize on the moment, using the mug shot to direct people to a fundraising site.
• And he posted the mug shot on X, the social network formerly known as Twitter, marking his first post on the platform since Jan. 8, 2021.
• Ahead of the former Republican president’s trip to Atlanta, aides said that Trump had retained lawyer Steven Sadow.
• “The President should never have been indicted. He is innocent of all the charges brought against him,” Sadow said in a statement.
• Last week, Willis, a Democrat, charged him and 18 others with operating a criminal enterprise to overturn his 2020 loss in Georgia.
• If people don’t turn themselves in, warrants would be issued for their arrest, she said.

T-Bill Deluge Risks Draining Bank Reserves, St. Louis Fed Warns – Bloomberg, 8/25/2023

• As the US Treasury borrows heavily in the bills market, the Federal Reserve may find it has to pause its efforts to shrink its balance sheet to ensure the banking system remains stable, according to the St. Louis Fed.
• The US Treasury has sold about $1 trillion of bills since June after the government suspended the debt ceiling.
• The cash to buy this government debt can come from at least two places instead: bank accounts, or money market funds.
• Recently money market funds have been holding back on buying the bills, because they can often earn more by just parking their money at the Fed, using the central bank’s overnight reverse repurchase facility, known as ON RRP.
• If too much money instead comes from the banking system, lenders could find themselves with too few reserves to meet regulatory requirements, Federal Reserve Bank of St. Louis economists Amalia Estenssoro and Kevin Kliesen wrote in a research note this week.
• That could force the central bank to halt its quantitative tightening program, known as QT.

EUROPE & WORLD

Shares of China’s food delivery leader Meituan fall more than 5% on weaker Q3 outlook – CNBC, 8/25/2023

• Meituan’s Hong Kong-listed shares fell more than 5% on Friday after CEO Wang Xing warned of a food delivery slowdown in the next quarter.
• “For our food delivery, we expect the third quarter or the volume will slow down, but still be more resilient than other consumption-related sectors,” Wang said during the earnings call on Thursday.
• Revenue was 67.96 billion Chinese yuan ($9.33 billion), up 33.4% from 50.93 billion yuan posted in the same period a year ago.
• The firm also swung to profit of 4.69 billion Chinese yuan for the second quarter, compared to a loss of 1.11 billion Chinese yuan a year ago.
• Regions such as Beijing, Tianjin and the provinces of Hebei, Shanxi and Henan experienced extreme rain in July, causing widespread flooding.
• Typhoon Doksuri swept north after ravaging southern Chinese provinces.
• “Order volume in Q3 last year was a relatively high base, but we think a temporary slowdown in order volume growth is due to external factors,” said Wang.
• “We will continue to activate our product and operational strategy to better capture the demand and stimulate the recovery.”

China imports record amount of chipmaking equipment – Financial Times, 8/25/2023

• China’s imports of semiconductor equipment have surged to record highs ahead of the implementation of export curbs by US allies.
• Chinese customs data shows the country’s chip production tool imports in June and July totaled nearly $5bn, up 70% from $2.9bn in the same period last year.
• Most of the imports came from the Netherlands and Japan, two countries that have imposed export restrictions on chipmaking equipment as they work with the US to slow China’s technological advancement.
• The restrictions mean buyers of some tools will have to apply for licenses from the Dutch and Japanese governments, raising concern among Chinese chipmakers.
• Japan started enforcing its restrictions on July 23, while the Dutch curbs will come into effect on September 1.
• While it is not clear how much of the increase in imports relates to tools that will be covered by restrictions, the purchases suggest China wants to avoid any disruption to its plans to expand chip production.
• Chinese imports of Dutch chipmaking equipment doubled in June and July from May as a result of the delivery of more lithography machines to Chinese clients from ASML, said industry insiders familiar with equipment procurement in the country.
• According to technology market research group Counterpoint, there was a 30 per cent increase in shipments from the top five chipmaking equipment sellers to China in the second quarter of this year.

China Eases Home Purchase Rules in New Push to Boost Economy – Bloomberg, 8/25/2023

• China unveiled a further easing of its mortgage policies to halt a slump in its residential property market and revive growth in the world’s second-largest economy.
• The country is proposing that local governments can scrap a rule that disqualifies people who’ve ever had a mortgage – even if fully repaid – from being considered a first-time homebuyer in major cities, official Xinhua news agency reported on Friday, citing the Ministry of Housing and Urban-Rural Development, the People’s Bank of China and the National Administration of Financial Regulation.
• City governments can have leeway on whether to adopt the policy, according to the notice.
• The government also said it will extend the personal income tax rebates for people who buy new homes within one year after selling old homes till the end of 2025, according to a statement from the Ministry of Finance.

Saudi Arabia Eyes Chinese Bid for Nuclear Plant – Wall Street Journal, 8/25/2023

• Saudi Arabia is weighing a Chinese bid to build a nuclear-power plant in the kingdom, Saudi officials familiar with the matter said, in a move designed to pressure the Biden administration to compromise on its conditions for U.S. help in the kingdom’s quest for nuclear power.
• The U.S. has said American nuclear aid is contingent on the Saudis agreeing to not enrich their own uranium or mine their own uranium deposits in the kingdom—nonproliferation conditions not sought by China, which has been seeking to strengthen its influence in the Middle East, to the consternation of Washington.
• Saudi Arabia has asked the U.S. to help it develop a civilian nuclear program as part of a potential deal that would include diplomatic normalization with Israel, which Riyadh doesn’t recognize.
• Saudi Arabia is also asking the U.S. to provide security guarantees for the kingdom as part of such a deal.
• Israel and some officials and lawmakers in Washington are worried that Saudi Arabia’s goal of developing a nuclear-energy program could pave the way for Riyadh to develop nuclear weapons.
• China National Nuclear, a state-owned company known as CNNC, has bid to build a nuclear plant in Saudi Arabia’s Eastern Province, near the border with Qatar and the United Arab Emirates, the officials said.

Ukraine’s Slow Offensive Buoys Putin and Worries Allies – Bloomberg, 8/25/2023

• Ukraine’s allies now worry the war is dragging into a long fight that may strengthen Vladimir Putin’s hand as hopes fade that Kyiv’s forces will deliver a definitive breakthrough this year.
• More than two months into its counteroffensive, Kyiv has so far managed to make only tactical advances against heavily dug-in Russian forces, despite having committed many of the units trained and armed by the US and Europe for the operation.
• The window for further big actions is narrowing as wet and cold weather looms in the autumn.
• Ukraine and its allies vow to keep up the fight as long as needed, but officials concede it will be a tall order to repeat the levels of massive support that made the current push possible.
• Stocks of ammunition in particular are depleted and production in the US and Europe won’t be ramped up until late 2024.
• F-16 fighters likely won’t arrive until next year, either.

Weight-Loss Drug Wegovy Reduces Heart Failure Symptoms in Obese Patients – Bloomberg, 8/25/2023

• Wegovy, the blockbuster weight-loss medication from Novo Nordisk, alleviated heart failure symptoms in patients with obesity, according to a late-stage trial that adds to the drug’s potential benefits.
• A weekly dose reduced patients’ ills that can include shortness of breath, fatigue, swelling in the legs and irregular heartbeat, according to findings published Friday in the New England Journal of Medicine.
• Novo’s findings are “very important,” said Eugene Yang, a cardiologist at the University of Washington who’s chair of the American College of Cardiology’s prevention of cardiovascular disease council.
• “As cardiologists, we want to make people feel better. Patients who are able to walk longer distances is beneficial, people losing weight and optimizing other risk factors is beneficial.”
• People with obesity are typically at greater risk for developing a form of heart failure that occurs when its lower chamber pumps less blood than the body needs.
• In the US, an estimated 2.5 million people have this condition, called heart failure with preserved ejection fraction, and more than 80% of those patients also have obesity.
• It’s most common in older people, and it can be progressive and lethal.

Rolex to Buy Watch Retailer Bucherer – Wall Street Journal, 8/25/2023

• Rolex has agreed to buy Bucherer, a major tie-up in the closely held luxury-watch industry that will give it more control over how its watches are sold.
• The companies didn’t disclose financial terms of the deal.
• Switzerland-based Bucherer, a 135-year-old watch retailer, will keep its name and continue to independently run its business, Rolex said Thursday.
• Bucherer operates more than 100 stores globally, 53 of which currently distribute Rolex watches.
• Bucherer runs 48 stores that distribute Rolex-owned Tudor watches.
• Rolex’s move deeper into the retailing side of the business is a major shift for the Swiss manufacturer.
• Bucherer also services Rolex and Tudor brands.
• Last year, Rolex said it would begin issuing certificates of authenticity to authorized dealers selling its preowned watches, beginning with Bucherer stores in Europe.

Heineken Sells Russia Business…for $1 – Wall Street Journal, 8/25/2023

• Beer giant Heineken said it sold its Russia business, which includes seven breweries and 1,800 employees, to a Russian packaging and cosmetics company for the symbolic sum of about $1.
• Russia recently moved to make it tougher for companies to leave the country, passing a decree in April that allows the state to take temporary control of the assets of companies or individuals from what Moscow calls “unfriendly” states.
• “Recent developments demonstrate the significant challenges faced by large manufacturing companies in exiting Russia,” said Heineken Chief Executive Dolf van den Brink.
• The deal with Arnest Group has taken nearly 18 months to complete.
• Arnest in September bought the Russia business of Colorado-based can maker Ball for $530 million.

Factmonster – TODAY in HISTORY

• New Orleans was founded by French settlers and named after the Duke of Orleans. – 1718
• Uruguay declared its independence from Brazil. – 1825
• Matthew Webb became the first person to swim across the English Channel. It took him 21 hours and 45 minutes. – 1875
• The Department of the Interior created the National Park Service to manage and preserve national parks and monuments for future generations. – 1916
• Paris was liberated from Nazi occupation by Allied forces. – 1944
• NASA launched the infrared Spitzer Space Telescope. – 2003