A U.S. trade delegation will go to China the week of Jan. 7, Bloomberg reported Wednesday, citing two people familiar with the matter.

It will be the first time the two sides will meet face to face since U.S. President Donald Trump and China’s Xi Jinping agreed to de-escalate a trade war during a meeting in Argentina on Dec. 1.

The U.S. team will be led by Deputy Trade Representative Jeffrey Gerrish and will include David Malpass, Treasury undersecretary for international affairs, Bloomberg said. 

For months, the U.S. and China have engaged in tit-for-tat increases in tariffs on hundreds of billions of dollars’ worth of exports flowing between the two countries. 

At the meeting in Buenos Aires, the two leaders agreed to a 90-day truce in the trade war between the world’s two largest economies.

Trump also agreed to leave the tariffs on $200 billion worth of Chinese products at 10 percent, and not raise them to 25 percent on Jan. 1 as he had threatened.

Trump said his agreement with Xi would go down “as one of the largest deals ever made. … And it’ll have an incredibly positive impact on farming, meaning agriculture, industrial products, computers — every type of product.”

Trump and Xi also agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, nontariff barriers, cyber intrusions and cyber theft, services and agriculture. 

U.S. Trade Representative Robert Lighthizer, who was put in charge of the China talks, said the negotiations would not be extended beyond the 90-day deadline. He said that March 1 was a “hard deadline” that was endorsed by Trump, Bloomberg reported.

Lighthizer will not be part of the team going to Beijing.
…

Wall Street notched its best day in 10 years as stocks rallied back Wednesday, giving some post-Christmas hope to a market that has otherwise been battered this December.

The Dow Jones Industrial Average jumped more than 1,000 points — its biggest point-gain ever — rising nearly 5 percent as investors returned from a holiday break. The benchmark S&P 500 index also gained 5 percent and the technology heavy Nasdaq rose 5.8 percent.

But even with the rally, the market remains on track for its worst December since 1931, during the depths of the Great Depression, and to finish 2018 with its steepest losses in a decade.

Technology companies, health care stocks, banks drove much of the broad rally. Retailers also were big gainers, as traders cheered a healthy holiday shopping season marked by robust consumer spending. Amazon had its biggest gain in more than a year.

But what really might have pushed stocks over the top was a signal from Washington that President Donald Trump would not try to oust the chairman of the Federal Reserve.

On Monday, Trump tweeted another critical volley about the central bank’s policy, rattling markets over the possibility the White House might interfere with the traditionally independent Federal Reserve. But in an interview with The Wall Street Journal published Wednesday, a White House economic adviser said that Fed chairman Jerome Powell is in no danger of being fired.

Energy stock jump

Energy stocks also rebounded as the price of U.S. crude oil notched its biggest one-day gain in more than two years.

All told, the S&P 500 index rose 116.60 points, or 5 percent, to 2,467.70. The Dow soared 1,086.25 points, or 5 percent, to 22,878.45. The tech-heavy Nasdaq gained 361.44 points, or 5.8 percent, to 6,554.36. The Russell 2000 index of smaller-company stocks picked up 62.89 points, or 5 percent, 1,329.81.

Trading volume was lighter than usual following the Christmas holiday. Markets in Europe, Hong Kong and Australia were closed.

“The real question is do we have follow-through for the rest of this week,” said Sam Stovall, chief investment strategist for CFRA.

Wednesday’s gains pulled the S&P 500 back from the brink of what Wall Street calls a bear market — a 20 percent tumble from an index’s peak. A further stumble would have marked the end to the longest bull market for stocks in modern history after nearly 10 years. The index is now down 15.8 percent since its all-time high September 20.

Powell’s position is safe

Stocks fell sharply Monday after Trump lashed out at the central bank. Administration officials had spent the weekend trying to assure financial markets that Fed chairman Jerome Powell’s job was safe. On Tuesday, Trump reiterated his view that the Federal Reserve is raising interest rates too fast, but called the independent agency’s rate hikes a “form of safety” for an economy doing well.

On Wednesday, Kevin Hassett, chairman of the White House Council of Economic Advisers, weighed in, saying Powell is in no danger of being fired, The Wall Street Journal reported.

The lackluster finish to 2018 comes as most economists expect growth to slow in 2019, though not by enough to slide into a full-blown recession. Many economic barometers still look encouraging. Unemployment is at 3.7 percent, the lowest since 1969. Inflation is tame. Pay growth has picked up. Consumers boosted their spending this holiday season.

Even so, traders have been jittery this autumn over signs that the global economy is slowing, the escalating U.S. trade dispute with China and another interest rate increase by the Fed. Many investors are growing worried that corporate profits — which drive stock market gains — are poised to weaken.

Thumps need a ‘vacation’

Some of what Wall Street sees coming out of the White House has added to the market’s uncertainty, specifically the president’s attacks on the Fed and remarks about the ongoing trade conflict with China.

The president could help restore some stability to the market if he “gives his thumbs a vacation,” Stovall said.

“Tweet things that are more constructive in terms of working out an agreement with Democrats and with China. And then just remain silent as it relates to the Fed,” Stovall said.

The partial U.S. government shutdown that started Saturday is unlikely to hurt the economy much, although it may deprive the financial markets of data about international trade and gross domestic product. The Bureau of Economic Analysis said Wednesday that it’s required to suspend all operations until Congress approves funding, which means that the government might not release its fourth-quarter report on gross domestic product as scheduled for January 30.

Technology stocks accounted for much of Monday’s early bounce. Adobe rose 8.7 percent to $222.95. Payment processors Visa and Mastercard also headed higher. Visa added 7 percent to $130.23, while Mastercard gained 6.7 percent to $186.43.

Big retailers were among the gainers. Amazon climbed 9.4 percent to $1,470.90. Kohl’s gained 10.3 percent to $65.92. Nordstrom picked up 5.8 percent to $46.75.

Homebuilders mostly rebounded after an early slide following a report indicating that annual U.S. home price growth slowed in October. PulteGroup climbed 4.7 percent to $25.85.

U.S. crude climbs

Benchmark U.S. crude climbed 8.7 percent to settle at $46.22 a barrel in New York. Brent crude, used to price international oils, gained 7.9 percent to $54.47 a barrel in London.

The pickup in oil prices helped boost energy stocks. Marathon Petroleum rose 4.8 percent to $56.93.

Bond prices fell. The yield on the 10-year Treasury note rose to 2.79 percent from 2.75 percent late Monday.

The dollar strengthened to 111.36 yen from 110.41 yen on Monday. The euro weakened to $1.1351 from $1.1404.

Gold edged up 0.1 percent to $1,273 an ounce and silver gained 2 percent to $15.12 an ounce. Copper gained 1.5 percent to $2.70 a pound.

Around the world

In other trading Wednesday, South Korea’s Kospi gave up 1.3 percent, while Japan’s Nikkei 225 index, which plunged 5 percent on Tuesday, picked up 0.9 percent. Shares fell in Taiwan, Singapore and Indonesia, but rose in Thailand.
…

Farmers in the Indian state of Chhattisgarh are getting back land that was taken from them more than a decade ago by the government because it was not used, a rare move in a country riven by conflict over land.

Chief Minister Bhupesh Baghel of the Congress Party, which won a state election earlier this month with pledges to honor land rights, said he has asked officials to return about 2,000 hectares (7.7 square miles) in Bastar district.

“The process of returning the land will start soon,” Baghel said in a statement earlier this week, without giving details.

Return of land is rare in India, where conflicts have risen as highways and factories are built in one of the fastest growing economies in the world.

About 660 disputes over land have stalled hundreds of projects and forced millions of people from their farms across India, according to research organization Land Conflict Watch.

Chhattisgarh, under the earlier Bharatiya Janata Party (BJP) government, agreed in 2005 to allocate land for a Tata Steel factory in Bastar. Farmers protested giving up their land.

Tata Steel, among the world’s top producers, pulled out of the project in 2016, citing delays.

Authorities said then the land would go into a land bank for other developments to generate jobs in one of India’s poorest states.

“The farmers who lost their land have suffered for years, and struggled to make a living,” said Kishore Narayan, a lawyer with advocacy Human Rights Law Network in Chhattisgarh.

“We hope that the state will look into all cases of lands lying idle and return them,” he told the Thomson Reuters Foundation on Wednesday.

India has enacted numerous laws to protect the rights of farmers.

A 2013 federal land acquisition law, passed by the Congress government, made consent of farmers mandatory, and introduced adequate compensation and resettlement for those affected.

Any unutilized land is to be returned to owners after five years, or go into the state land bank.

In 2016, the Supreme Court ordered West Bengal state to return land that had been acquired for a Tata Motors factory but was not used, after a decade-long fight by farmers.

Last year, South Korean steelmaker POSCO asked Odisha state to take back land allotted to it for a long-delayed steel project and return it to villagers, although authorities said the land will revert to the state.

Also last year, the Supreme Court heard a petition by an advocacy group, which said about 80 percent of land acquired for large industrial zones was lying idle.

Land rights have come to the fore in recent state elections, and could hurt Prime Minister Narendra Modi’s ruling Hindu nationalist BJP party in an upcoming national election, as farmers make up a big voting bloc, analysts say.
…

Japan is withdrawing from the International Whaling Commission and will resume commercial whaling next year, a government spokesman said Wednesday, in a move expected to spark international criticism.

“We have decided to withdraw from the International Whaling Commission in order to resume commercial whaling in July next year,” top government spokesman Yoshihide Suga told reporters.

“Commercial whaling to be resumed from July next year will be limited to Japan’s territorial waters and exclusive economic zones. We will not hunt in the Antarctic waters or in the southern hemisphere,” Suga added.

The announcement had been widely expected and comes after Japan failed in a bid earlier this year to convince the IWC to allow it to resume commercial whaling.

Tokyo has repeatedly threatened to pull out of the body, and has been regularly criticized for catching hundreds of whales a year for “scientific research” despite being a signatory to a moratorium on hunting the animals.

Suga said Japan would officially inform the IWC of its decision by the end of the year, which will mean the withdrawal comes into effect by June 30.

Leaving the IWC means Japanese whalers will be able to resume hunting in Japanese coastal waters of minke and other whales currently protected by the IWC.

But Japan will not be able to continue the so-called scientific research hunts in the Antarctic that has been exceptionally allowed as an IWC member under the Antarctic Treaty.

The withdrawal means Japan joins Iceland and Norway in openly defying the IWC’s ban on commercial whale hunting.

It is certain to infuriate conservationists and anti-whaling countries such as Australia and New Zealand, and deepen the divide between anti- and pro-whaling countries.

Japan has hunted whales for centuries, and their meat was a key source of protein in the immediate post-World War II years when the country was desperately poor.

But consumption has declined significantly in recent decades, with much of the population saying they rarely or never eat whale meat. 
…

President Donald Trump on Tuesday expressed confidence in Treasury Secretary Steven Mnuchin amid worries over a weakening economy and a stock market slump, but repeated his criticism of the U.S. Federal Reserve, saying it has raised interest rates too quickly.

Speaking to reporters in the Oval Office after a Christmas video conference with U.S. troops deployed abroad, Trump also said U.S. companies were “the greatest in the world” and presented a “tremendous” buying opportunity.

Asked if he has confidence in Mnuchin, Trump said: “Yes, I do. Very talented guy. Very smart person,” he said. His comments came after Mnuchin on Monday held a conference call with U.S. regulators to discuss plunging U.S. stock markets.

The call did more to rattle markets than to assure them. All three major U.S. stock indexes ended down more than 2 percent on the day before the Christmas holiday. The S&P 500 has lost about 19.8 percent from its Sept. 20 closing high, just shy of the 20 percent threshold that commonly defines a bear market.

Mnuchin also spoke on Sunday with the heads of the six largest U.S. banks, who confirmed they have enough liquidity to continue lending and that “the markets continue to function properly.”

Investors said his move to convene a call with the president’s Working Group on Financial Markets, known as the “Plunge Protection team,” may have weighed on sentiment.

On Tuesday, Trump praised U.S. companies and said their lower stock prices present an opportunity for investors. “I have great confidence in our companies. We have companies, the greatest in the world, and they’re doing really well. They have record kinds of numbers. So I think it’s a tremendous opportunity to buy.”

U.S. stocks have dropped sharply in recent weeks on concerns over weaker economic growth. Trump has largely laid the blame for economic headwinds on the Fed, openly criticizing its chairman, Jerome Powell, whom he appointed.

“They’re raising interest rates too fast because they think the economy is so good. But I think that they will get it pretty soon,” Trump said, repeating his criticism.

Media reports have suggested Trump has gone as far as discussing firing Powell, and he told Reuters in August that he was “not thrilled” with the chairman.

On Monday, Trump said “The only problem our economy has is the Fed.”

The Fed hiked interest rates again last week, as had been widely expected.
…

Former Nissan Motor Co. executive Greg Kelly was released from jail in Japan Tuesday after a Tokyo court rejected prosecutors’ request to continue to detain him.

The Tokyo District Court granted his release after setting bail at $636,000.

Kelly had been detained for 37 days after being arrested and charged with underreporting the pay of his boss, ousted Nissan Chairman Carlos Ghosn, by $44 million.

Ghosn was also arrested along with Kelly on November 19 on suspicion of conspiring to understate Ghosn’s pay. Ghosn remains in custody.

The charge is part of a wider effort by Japanese prosecutors and the auto company to show that Ghosn leveraged his position for personal gain.

The court set restrictions on Kelly’s release. Kelly is prohibited from traveling outside Japan without the court’s permission and from meeting with people linked to the case against him.
…

U.S. stock markets fell sharply on Monday with the S&P 500 down more than two percent and the Dow off nearly three percent.

President Donald Trump is blaming the Federal Reserve (central bank) for stock market declines and other economic problems.

In tweets, Trump has said the only U.S. economic problem is rising interest rates. He accused Fed chief Jerome Powell of not understanding the market and damaging the economy with rate hikes.

The Fed slashed the key interest rate nearly to zero to boost growth during the recession that started in 2007. The central bank kept rates low for several years.

Eventually, growth recovered, and unemployment dropped to its lowest level in 49 years, and Fed officials judged that the emergency stimulus was no longer needed. Fed leaders voted to reduce the stimulus by raising interest rates gradually. The concern was that too much stimulus could spark inflation. Experts say such a sharp increase in prices could prompt a damaging cycle of price increases leading to rising wage demands, which would spark another round of price hikes.

Analysts quoted in the financial press say Trump’s attacks on the Fed make investors worry that the central bank might lose the independence that allows it to make decisions based on economic factors rather than what is politically popular.

Some economists say investor confidence has also been shaken by Trump’s tariffs on major trading partners. Raising trade costs can reduce trade and cutting trade cuts demand for goods and services, which slows economic growth.

Investor confidence, or a lack of it, can cause stock and other markets to decline as worried stock holders sell shares and prospective investors stop buying available stocks. When buyer demand drops, prices fall.

Another factor hurting investor confidence is the political impasse in Washington over money for Trump’s border wall with Mexico. The bickering means Trump and congress can not agree on spending priorities, so legislation paying some government employees has lapsed.

In an effort to calm turbulent markets, Treasury Secretary Steve Mnuchin spoke with leaders of top U.S. banks in an unusual session Sunday. He says they have the money they need for routine operations.
…

The leading pan-European stock exchange has launched a 625 million euro takeover bid to acquire the Oslo Stock Exchange.

Euronext, the operator of stock exchanges in Paris, Amsterdam, Brussels, Dublin and Lisbon, said in a statement that it had approached the board of directors of the Oslo Stock Exchange (Oslo Bors VPS) to seek its support for an all-cash offer for all the outstanding shares of Oslo Børs VPS, the Norwegian Stock Exchange and national CSD operator, based in Oslo.

“Euronext strongly believes that Oslo Børs VPS’ unique strategic and competitive positioning, including a global leading position in seafood derivatives and a deep-rooted expertise in oil services and shipping, would further strengthen Euronext’s position as the leading market infrastructure for the financing of the real economy in Europe,” the statement said. 

If the offer is accepted, Euronext would be fully committed to support the development of Oslo Børs VPS and of the broader Norwegian financial ecosystem, the statement said.

Following the initiative of a group of its shareholders to acquire the Oslo Stock Exchange, Euronext has secured support for the offer from shareholders representing 49.6% of all outstanding shares.

However, it is not certain that a transaction will be completed, Euronext’s statement said, but the pan-European stock exchange will communicate material information, if any, in due course.
…

South Korea said Monday it will fine BMW $9.9 million and will file a criminal complaint against the German automaker for delaying a recall of cars with faulty engines that caught fire. 

South Korea’s transport ministry said its investigation uncovered that BMW knew about the faulty engines, but did not execute a prompt recall. 

The ministry said BMW deliberately tried to cover up the technical issues with the exhaust gas recirculation, or EGR, even after dozens of fires had been reported earlier this year. 

“BMW announced earlier that it had become aware of the connection between the faulty EGR cooler and the fire only on July 20 this year,” the ministry said in a statement. “But we discovered that . . . BMW’s German headquarters had already formed a special team in October 2015 tasked with solving the EGR problem.” 

BMW did eventually mount a recall of more than 170,000 cars. 

The French news agency AFP reports some South Korea parking lots had refused to accept BMW cars for fear the cars would catch fire. 
…

The U.S. Treasury Secretary said on Sunday he had held a series of phone conversations with top American bankers in what appeared to be a bid to ease nerves in financial markets.

U.S. stocks have plunged in recent weeks on concerns over slowing economic growth, with the S&P 500 index on pace for its biggest percentage decline in December since the Great Depression.

“Today I convened individual calls with the CEOs of the nation’s six largest banks,” Treasury Secretary Steven Mnuchin said on Twitter.

The Treasury said in a statement that Mnuchin talked with the chief executives at Bank of America, Citi, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo.

“The CEOs confirmed that they have ample liquidity available for lending,” the Treasury said.
…

A White House official says tension between a president and the interest-rate setting Federal Reserve is “traditional as part of our system.”

Acting chief of staff Mick Mulvaney says it should come as no surprise that President Donald Trump is unhappy the central bank, an independent agency, “is raising rates and we think driving down the value of the stock market.”

Speculation about the fate of Trump’s appointed Fed chairman, Jerome Powell, has swirled after Bloomberg News reported that Trump discussed firing Powell after this past week’s rate increase.

Treasury Secretary Steven Mnuchin tweeted Saturday that Trump has denied ever suggesting that and doesn’t believe he has the right to dismiss Powell.

Mulvaney also tells ABC’s “This Week” that the economy’s “fundamentals are still strong.”

 
…

China and the United States held a vice ministerial-level call on Friday, the second such contact in a week, achieving a “deep exchange of views” on trade imbalances and the protection of intellectual property, the Chinese Ministry of Commerce said.

A statement posted on the ministry’s website on Sunday said the two countries “made new progress” on those issues, without specifying further.

It also said China and the United States discussed arrangements for the next call and mutual visits.

On Wednesday, the ministry said Beijing and Washington had held a vice ministerial-level telephone call about trade and economic issues, without providing other details.

The calls took place amid signs of a thaw in a trade dispute between the United States and China, the world’s two largest economies.

U.S. President Donald Trump and Chinese President Xi Jinping this month agreed to a truce that delayed the planned Jan. 1 U.S. increase of tariffs on $200 billion worth of Chinese goods while they negotiate a trade deal.

Chinese Commerce Ministry officials indicated earlier the two countries were in close contact over trade, and any U.S. trade delegation would be welcome to visit.
…

Now in its 10th year, America’s economic expansion still looks sturdy. Yet the partial shutdown of the government that began Saturday has added another threat to a growing list of risks. 

The stock market’s persistent fall, growing chaos in the Trump administration, higher interest rates, a U.S.-China trade war and a global slowdown have combined to elevate the perils for the economy. 

Gregory Daco, chief U.S. economist at Oxford Economics, said he thinks the underlying fundamentals for growth remain strong and that the expansion will continue. But he cautioned that the falling stock market reflects multiple hazards that can feed on themselves. 

“What really matters is how people perceive these headwinds — and right now markets and investors perceive them as leading us into a recessionary environment,” Daco said. 

Many economic barometers still look encouraging. Unemployment is near a half-century low. Inflation is tame. Pay growth has picked up. Consumers boosted their spending this holiday season. Indeed, the latest figures indicate that the economy has been fundamentally healthy during the final month of 2018. 

Still, financial markets were rattled Thursday by President Donald Trump’s threat to shut down the government unless his border wall is funded as part of a measure to finance the government — a threat that became reality on Saturday. As tensions with the incoming Democratic House majority have reached a fever pitch, Trump warned Friday that he foresees a “very long” shutdown. 

The expanding picture of a dysfunctional Trump administration grew further with the surprise resignation of Defense Secretary James Mattis in protest of Trump’s abrupt decision to pull U.S. troops out of Syria — a move that drew expressions of alarm from many Republicans as well as Democrats. 

How markets and government officials respond to such risks could determine whether the second-longest U.S. expansion on record remains on course or succumbs eventually to a recession.

A closer look at the risks: 

Administration chaos 

It has been a tumultuous few days, even for a White House that has been defined by the president’s daily dramas. 

Trump faces an investigation into Russian interference in the 2016 elections that has led to indictments and criminal convictions of some of his closest confidants. He is coping with a wave of top staff defections, having lost both his chief of staff and defense secretary. He is in the process of installing a new attorney general. 

Then there is the partial government shutdown that Trump himself has pushed. 

The shutdown is unlikely to hurt economic growth very much, even if it lasts awhile, because 75 percent of the government is still being funded. S&P Global Ratings estimates that each week of the shutdown would shave a relatively minuscule $1.2 billion off the nation’s gross domestic product. 

Still, the problem is that the Trump administration appears disinclined to cooperate with the incoming House Democratic majority. So the federal support through deficit spending that boosted the economy this year will likely wane, Lewis Alexander, U.S. chief economist at Nomura, said in his 2019 outlook. 

That, in part, is why the economy is widely expected to weaken from its roughly 3 percent growth this year, which would be the strongest performance since 2005. 

Tumbling stocks

Stock investors have been trampled since October, with the Dow Jones industrial average sinking nearly 15 percent. The plunge followed a propulsive winning streak for the stock market that began in 2009. But investors are internalizing all the latest risks, including Trump’s trade war with China and higher borrowing rates, and how much they might depress corporate profits and the economy.  

“Markets people are forward-looking, so they’re taking into account the latest information,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. 

Markets can often fall persistently without sending the economy into a tailspin. But O’Sullivan warned of a possible feedback loop in which tumbling stock prices would erode consumer and business confidence, which in turn could send stocks sinking further. At that point, the economy would likely worsen, the job market would weaken and many ordinary households would suffer. 

Trade war

For economists, this may pose the gravest threat to the economy. Trump has imposed tariffs against a huge swath of goods from China, which has retaliated with its own tariffs on U.S. products. These import taxes tend to dampen economic activity and diminish growth. 

“The trade war with China is now the biggest impediment to U.S. economic growth,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in his forecast for the first half of 2019. 

In part because of the taxes Trump imposed on Chinese imports, manufacturing growth appears to be slowing, with factory owners facing higher costs for raw materials. The president has held off on further escalating tariffs to see if an agreement, or at least a lasting truce, can be reached with China by March. 

Any damage from trade wars tends to worsen the longer the disputes continue. So even a tentative resolution in the first three months of 2019 could remove one threat to economic growth. 

Interest rate hikes 

The Federal Reserve has raised a key short-term rate four times this year and envisions two more increases in 2019. Stocks sold off Wednesday after Chairman Jerome Powell laid out the rationale. Powell’s explanation, in large part, was that the Fed could gradually raise borrowing costs and limit potential U.S. economic growth because of the job market’s strength. 

The Fed generally raises rates to keep growth in check and prevent annual inflation from rising much above 2 percent. But inflation has been running consistently below that target. 

If the central bank were to miscalculate and raise rates too high or too fast, it could trigger the very downturn that Fed officials have been trying to avoid. This has become a nagging fear for investors. 

Global slowdown 

The world economy is showing clear signs of a downshift, with many U.S. trading partners, especially in Europe and Asia, weakening or expected to expand at a slower speed. Their deflating growth can, in turn, weigh down the U.S. economy. 

Several other global risks abound. There is Britain’s turbulent exit from the European Union. Italy appears close to recession and is struggling to manage its debt. China, the world’s second-largest economy after the U.S., is trying to manage a slowdown in growth that is being complicated by its trade war with Trump. 

“Next year is likely to be challenging for both investors and policymakers,” Alexander, the Nomura economist, concluded in his outlook. 
…

U.S. President Donald Trump has reportedly discussed firing Federal Reserve Chairman Jerome Powell.

The reports of Trump’s questions about whether he has the authority to fire Powell raised concern among members of Congress, economists and Wall Street executives, leading Treasury Sectary Steven Mnuchin to tweet a statement from the president late Saturday.

Bloomberg News was first to report Trump’s discussions about firing the Fed chairman. Citing four people familiar with the discussions, Bloomberg reported Trump has become more frustrated with Powell after months of stock market losses and the central bank’s interest rate hike Wednesday.

The Washington Post has also spoken with two people familiar with Trump’s questions about firing Powell, who confirmed Trump’s anger about Fed policy and desire to blame someone for the stock market’s recent huge losses.

Advisers reportedly have warned Trump that firing Powell would further roil financial markets, yet they said Trump has discussed the matter many times in the past few days.

Trump appointed Powell to the chairman’s position. A Federal Reserve chairman serves a five-year term, but in practice usually stays in office as long as he or she wishes. Legal experts say it is legally unclear if the president has the authority to fire a Fed chairman. The Federal Reserve Act says that a Fed chairman can only be removed “for cause.” That generally means for criminal activity or malfeasance.

A firing of Powell would come after weeks of heavy losses in the markets. On Friday, equities closed their worst week since 2008, with the S&P 500 Index plummeting more than 7 percent and the Nasdaq Composite Index plunging into a bear market.

Trump has been busy shaking up his administration since the November midterm elections. He has announced the departures of Attorney General Jeff Sessions, White House Chief of Staff John Kelly, Interior Secretary Ryan Zinke and Defense Secretary James Mattis. The U.S. envoy to the anti-ISIS coalition has also submitted his resignation.
…

After almost 10 years, Wall Street’s rally looks like it’s ending. 

Another day of big losses Friday left the U.S. market with its worst week in more than seven years. All of the major indexes have lost 16 to 26 percent from their highs this summer and fall. Barring huge gains during the upcoming holiday period, this will be the worst December for stocks since 1931. 

There hasn’t been one major shock that has sent stocks plunging. The U.S. economy has been growing since 2009, and most experts think it will keep expanding for now. But it’s likely to do so at a slower pace. 

As they look ahead, investors are finding more and more reasons to worry. The U.S. has been locked in a trade dispute with China for nine months. Economies in Europe and China are slowing. And rising interest rates in the U.S. could slow its economy even more. 

Dreadful month

Stocks are now headed for their single worst month since October 2008, when the market was being battered by the global financial crisis. 

December is generally the strongest time of the year for U.S. stocks. Traders often talk about a “Santa rally” that adds to the year’s gains as people adjust their portfolios in anticipation of the year to come.  

But not this year. 

No sector of the market has been spared. Large multinational companies join smaller domestic ones in their losses. And huge high-tech companies, once the best-performing stocks on the market, are now leading the way lower.  

Technology’s huge popularity during the recent boom years made it even more vulnerable as investors’ moods turn sour. Amazon, Facebook, Apple, Netflix and Google’s parent company, Alphabet, have seen their market values fall by hundreds of billions of dollars. 

“If you live by momentum, you die by momentum,” said Sam Stovall, chief investment strategist for CFRA. 

The Nasdaq composite, which contains a high concentration of tech stocks, has sunk almost 22 percent from its record high in late August. Several big technology companies, notably Facebook and Twitter, have also suffered as a result of scandals over matters such as data privacy and election meddling, and traders worry that the industry will face greater government regulation that could increase costs and affect their profits. 

The major U.S. indexes fell 7 percent this week and they’ve sunk more than 12 percent in December. 

Global slowdown

Investors around the world have grown increasingly pessimistic about the global economy’s prospects over the next few years. It’s widely expected to slow down, but traders are concerned the cooling might be worse than they previously believed.  

After a sharp early gain Friday, the S&P 500 index retreated 50.84 points, or 2.1 percent, to 2,416.58. The S&P 500, the benchmark for many index funds, has fallen 17.5 percent from its high in September. 

The Dow Jones industrial average sank 414.23 points, or 1.8 percent, to 22,445.37. The Nasdaq skidded 195.41 points, or 3 percent, to 6,332.99. The Russell 2000 index of smaller-company stocks lost 33.92 points, or 2.6 percent, to 1,292.09. 

European markets rose slightly and Asian markets were mixed.  

The price of oil has also fallen sharply in recent weeks, down 40 percent from the high it reached in October, amid concerns over a glut in the market and the slowing economy. 

On Friday the price of U.S. crude slipped 0.6 percent to $45.59 a barrel in New York. Brent crude, the standard for international oil prices, fell 1 percent to $53.82 a barrel in London. 
…

The Canadian economy expanded by a greater-than-expected 0.3 percent in October from September, pushed higher by strength in manufacturing, finance and insurance, Statistics Canada data indicated Friday.

Analysts in a Reuters poll had predicted monthly GDP would increase by 0.2 percent. Fifteen of the 20 industrial sectors — which Statscan says represents around 80 percent of the economy — posted gains.

The release could well be a pleasant surprise for Bank of Canada Governor Stephen Poloz, who complained earlier this month that economic data heading into the fourth quarter were weaker than expected.

The manufacturing sector grew by 0.7 percent on higher output of machinery, primary metals, chemicals and food. The finance and insurance sector advanced by 0.9 percent on increased activity in bond and money markets.

Wholesale trade grew by 1.0 percent, while utilities were up 1.5 percent on unseasonably cold weather that contributed to higher electricity demand for heating purposes.
…

Plans to build another privately-financed power station in Nigeria to help end decades of chronic blackouts have been delayed because of concerns about persistent shortfalls in payments for electricity across the sector.

The $1.1 billion Qua Iboe Power Plant being developed by energy infrastructure company Black Rhino and the state-owned Nigerian National Petroleum Corporation won’t get a green light by the end of 2018 as planned and it was unclear when the deal might close, NNPC told Reuters.

The delay is a setback for Africa’s biggest oil producer where 80 million people don’t have access to grid power supplies and it exposes the difficulties in attracting private investment to a sector that successive governments have tried to reform.

The uncertainty surrounding the 540-megawatt Qua Iboe plant stems from the difficulties Nigeria’s first privately-financed independent power project — the 460-megawatt Azura-Edo plant — has encountered since it came online this year.

Azura was meant to be a model for a string of independent power plants financed by international investors. To give them confidence to invest in the first major plant since the power sector was privatized in 2013, the World Bank provided a safeguard known as a partial risk guarantee — meaning the lender would step in if Nigeria defaulted on payments.

Under the current system, the government-owned Nigerian Bulk Electricity Trading company (NBET) buys power from generators and passes it on to distributors who then collect money from customers and reimburse NBET.

But because NBET is not paid in full for the power it buys, generators such as Azura have been partly reimbursed from an emergency central bank loan fund created to keep the sector afloat.

NNPC told Reuters one of the reasons the Qua Iboe plant (QIPP), which is due to be built in the southern state of Akwa Ibom, had been delayed was because NBET appeared reluctant to commit to new projects to avoid increasing its liabilities.

“The continued delay relates to the current cashflow challenges at NBET, as highlighted by the Azura project,” a spokesman for NNPC said in an emailed statement. “This concern is justified by the fact that NBET is yet to see an improvement in collections from DISCOs [distribution companies].”

NBET did not immediately respond to a request for comment on NNPC’s statement about QIPP.

NBET chief executive Marilyn Amobi told Reuters in November that it was hard for the company to work because of poor infrastructure and shortfalls in cash from distributors needed to reimburse generators.

“You don’t have the infrastructure, you don’t have the financial position to do it, you don’t actually have the products, and you don’t have the grid,” she said.

World Bank conditions

NNPC said another problem for QIPP was that the World Bank had made a partial risk guarantee, similar to the one that helped Azura attract investors, contingent on the government’s implementation of an agreed power sector recovery plan.

“In theory it is okay, but the risk is there are delays in the approvals which may impact QIPP,” NNPC said. Power ministry officials and the World Bank have been in talks about long-term structural changes needed to trigger the release of a $1 billion loan to help pay for reforms.

A World Bank spokeswoman said the loan had yet to be submitted to its board for approval and that the Washington-based lender considered the recovery plan to be “critical for de-risking the sector for private investments.”

Problems that need to be tackled include decaying infrastructure, mounting debts, low tariffs for electricity and a dilapidated government-owned grid that would collapse if all the country’s power generators operated at full tilt.

Even though NBET has an agreement to buy 13 gigawatts (GW) from power generators, the system can only cope with distributors sending out an average of 4 GW, according to the ministry of power.

The World Bank spokeswoman confirmed any future guarantees for independent power plants (IPPs) would be linked to the plan’s implementation – because the economic and financial viability of generation capacity expansion was at risk.

A spokeswoman for Black Rhino, which is one of private equity firm Blackstone’s portfolio companies, declined to comment on NNPC’s announcement of a delay to QIPP. When the project was unveiled, Nigerian cement giant Dangote Group was named as a joint venture partner – along with Black Rhino and the Nigerian National Petroleum Corporation.

But a Dangote executive told Reuters on condition of anonymity that the company, owned by Africa’s richest man, Aliko Dangote, had pulled out.

“The huge debt level, and, the fact the IPPs are not making profits, is another reason for prospective investors to be deterred,” he said. “Further, collecting revenue from the distribution companies is also becoming a mirage.”

A Dangote Group spokesman declined to comment on the delay to QIPP, or whether the company had pulled out.

‘Illiquid and insolvent’

The payment problems in the Nigerian power sector were thrust into the spotlight in March when four generating companies filed a lawsuit against the government and Azura.

To ensure the generating companies were paid in full throughout 2017 and 2018, the government created a 701 billion naira ($2.3 billion) loan fund at the central bank to guarantee payments. When the fund was established in 2017, Azura wasn’t part of the calculations.

But when Azura started producing electricity, the fund was also used to pay the new plant to ensure the terms of loan deals guaranteed by the World Bank were not breached. As a result, the other companies were told they would only receive 80 percent of the sums owed, according to the lawsuit filed in March.

The four energy companies want the fund to reimburse them in full, rather than allocating part of the money to the new plant. Azura declined to comment on payments for power generated.

“If the central bank wasn’t paying, the system would collapse,” an official at a multilateral lender said on condition of anonymity. “Qua Iboe IPP would enter a system that is illiquid and insolvent. The liquidity is being provided by the central bank.”

The official said QIPP would need the same partial risk guarantee Azura received to get off the ground, but the handling of payments to Azura by the Nigerian authorities so far meant there was little appetite to offer the same support.

Fola Fagbule, senior vice president and head of advisory at Africa Finance Corporation (AFC) — one of the multilateral lenders that invested in Azura — agreed that the Qua Iboe project would struggle without payment guarantees.

“What you have is an insolvent system,” he said. “It is really difficult to make a case for a project on that scale.”

A person with direct knowledge of QIPP who declined to be named said Azura’s experience was damaging international investors’ view of Nigeria, Africa’s most populous nation.

“There has to be some understanding of how the sector is going to be able to afford new electrons coming into the grid,” the person said. “[Those involved] do not want QIPP to build a project that could just end up in a default situation.”

‘Knotty issues’

Nigeria’s privatized power sector typically does not use meters to provide invoices, bill collections are low and energy tariffs have remained fixed for three years, meaning customers receive unsustainably cheap electricity.

The effect, say industry experts, is that electricity distribution companies recover so little revenue from customers that they pay less than a third of what they owe to generating companies – and that’s why debts have ballooned.

Sunday Oduntan, spokesman for the Association of Nigerian Electricity Distributors, said debt levels in the sector were caused by the artificial suppression of tariffs. He said there was a 1.3 trillion naira ($4.2 billion) market shortfall that meant distributors were unable to invest in improvements.

“You cannot be selling a product below cost price and expect high remittance. The shortfall in the sector is because of the lack of a cost-reflective tariff,” said Oduntan, who speaks on behalf of Nigeria’s 11 electricity distribution companies.

Debts across the sector partly stem from a currency crisis that took hold in 2016, just months after Azura secured its financing. The bulk of power company costs are in U.S. dollars but customers pay for power in naira.

The naira lost about 30 percent of its value against the U.S. dollar in June 2016 but the devaluation was not factored into a government tariff structure that has remained unchanged. Louis Edozien, permanent secretary in the ministry of power, told Reuters there was evidence tariffs must rise, but it was also the responsibility of distributors to improve their collections, partly through better metering and infrastructure.

As for the future of QIPP, the state oil company said it would take six to eight months from whenever NBET executes an agreement to purchase power from the plant before a final investment decision could be taken.

The NNPC spokesman said there were a number of other “knotty issues”, including the completion of a transmission line from the project site. He said QIPP had now agreed in a major concession to pay $20 million for it to be finished.

He also said there was a disagreement between QIPP and the central bank about the exchange rate at which power producers could buy U.S. dollars with naira. He said this had been escalated to the minister of finance.

With the $1 billion World Bank power sector loan on hold for now, the government is considering putting another 600 billion naira into the central bank fund to pay generators when the initial amount runs out early next year, sources said.

It was not clear how the central bank loans to the sector would be repaid.

Central Bank Governor Godwin Emefiele told Reuters that payments from the fund could be made up to February and that the bank was holding talks with World Bank officials.

“The loan negotiations are still in progress with no terminal date yet fixed,” the power ministry’s Edozien said.

($1 = 306.6000 naira)
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US growth in the July-September quarter was slightly slower than previously reported, dragged down by the large drop in exports amid President Donald Trump’s multi-front trade wars.

With hundreds of billions of goods hit by retaliatory tariffs, US exports fell by the largest amount since early 2009 at the height of the global financial crisis.

Gross domestic product expanded by 3.4 percent in the third quarter rather than the 3.5 percent previously reported, due in large measure to the 4.9 percent drop in exports, five-tenths more than the Commerce Department originally estimated.

Goods exports dropped 8.1 percent, the biggest decline since the first three months of 2015.

Trump’s aggressive trade policies, and especially the tariff retaliation from China, has impeded exports, with soybean sales nearly grinding to a halt. The strong US dollar also has made American goods more expensive.

The smaller rise in consumer spending, largely the result of lower fuel costs, also contributed to the downward revision to GDP growth, the Commerce Department said.

Meanwhile, residential investment fell 3.6 percent, only partly offset by 1.1 percent gain in non-residential, or business, investment, data borne out by the slowdown in home construction and sales.

Other data show fourth quarter growth is shaping up to be even more sluggish. Purchases of durable goods — big ticket items like appliances, vehicles and machinery — rose in November compared to October, but much less than expected.

Orders were up 0.8 percent last month, less than half the increase economists had forecast, according to a separate Commerce Department report. That follows a big drop in October, and will drag on GDP in the final quarter of 2018.

Excluding transportation goods, durable goods orders fell 0.3 percent compared to October, and when defense is removed, the drop was 0.1 percent.

Orders are still 8.4 percent higher than they were through November 2017, but have been on a declining trend for three months.
…

It was another miserable day on Wall Street as a series of big December plunges continued, putting stocks on track for their worst month in a decade.

The Dow Jones Industrial Average dropped 464 points Thursday, bringing its losses to more than 1,700 points since Friday.

The benchmark S&P 500 index has slumped 10.6 percent this month and is almost 16 percent below the peak it reached in late September.

The steady gains of this spring and summer now fell like a distant memory. As we’ve entered the fall, investors started to worry that global economic growth is cooling off and that the U.S. could slip into a recession in the next few years. The S&P 500 is on track for its first annual loss in a decade.

The technology stocks that have led the market in recent years are now dragging it down. The technology-heavy Nasdaq composite is now down 19.5 percent from the record high it reached in August.

The market swoon is coming even as the U.S. economy is on track to expand this year at the fastest pace in 13 years. Markets tend to move, however, on what investors anticipate will happen well into the future, so it’s not uncommon for stocks to sink even when the economy is humming along.

Slowing economy a concern

Right now, markets are concerned about the potential for a slowing economy and two threats that could make the situation worse: the ongoing trade dispute between the U.S. and China, which has lasted most of this year, and rising interest rates, which act as a brake on economic growth by making it more expensive for businesses and individuals to borrow money.

The selling in the last two days came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.

Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said investors felt Fed Chairman Jerome Powell came off as unconcerned about the state of the U.S. economy, despite deepening worries on Wall Street that growth could slow even more in 2019 and 2020. Wren said investors want to know that the Fed is keeping a close eye on the situation.

“He may be a little overconfident,” said Wren. “The Fed needs to be paying attention to what’s going on.”

Powell also acknowledged that the Fed’s decisions are getting trickier because they need to be based on the most up-to-date figures on jobs, inflation, and economic growth. For the last three years the Fed told investors weeks in advance that it was almost certain to increase rates. But things are less certain now, and the market hates uncertainty

‘Completely overblown’

Treasury Secretary Steven Mnuchin said the market’s reaction to the Fed was “completely overblown.”

Investors have responded to a weakening outlook for the U.S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans. That’s generally good for the economy.

At the same time, the reduced bond yields can send a negative signal on the economy. Sharp drops in long-term bond yields are often seen as precursors to recessions.

The S&P 500 index skidded 39.54 points, or 1.6 percent, to 2,467.42. The Dow fell 464.06 points, or 2 percent, to 22,859.60 after sinking as much as 679.

The Nasdaq fell 108.42 points, or 1.6 percent, to 6,528.41. The Russell 2000 index of smaller companies dropped another 23.23 points, or 1.7 percent, to 1,326.

Stocks for smaller companies suffer

Smaller company stocks have been crushed during the recent market slump because slower growth in the U.S. will have an outsize effect on their profits. Relative to their size, they also tend to carry more debt than larger companies, which could be a problem in a slower economy with higher interest rates.

The Russell 2000 is down almost 24 percent from the peak it reached in late August and it’s down 13.6 percent for the year to date. The S&P 500, which tracks larger companies, is down 7.7 percent.

The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday. In general, shutdowns don’t affect the U.S. economy or the market much unless they stretch out for several weeks, which would delay paychecks for federal employees.

Oil prices still dropping 

Oil prices continued to retreat. Benchmark U.S. crude fell 4.8 percent to $45.88 a barrel in New York, and it’s dropped 40 percent since early October. Brent crude, used to price international oils, slipped 5 percent to $54.35 a barrel in London.

After early gains, bond prices headed lower. The yield on the two-year Treasury rose to 2.87 percent from 2.65 percent, while the 10-year note rose to 2.80 percent from 2.77 percent.

The gap between those two yields has shrunk this year. When the 10-year yield falls below the two-year yield, investors call it an “inverted yield curve.” That hasn’t happened yet, but investors fear it will. Inversions are often taken as a sign a recession is coming, although it’s not a perfect signal and when recessions do follow inversions in the yield curve, it can take a year or more.

“The bond market has been telling us something for about a year, and that is there’s not going to be much inflation and there’s not going to be a sustained surge in economic growth,” said Wren, of Wells Fargo.

Around the world

In France, the CAC 40 lost 1.8 percent and Germany’s DAX fell 1.4 percent. The British FTSE 100 slipped 0.8 percent. Indexes in Italy, Portugal and Spain took bigger losses.

Tokyo’s Nikkei 225 lost 2.8 percent and Hong Kong’s Hang Seng gave up 1 percent. Seoul’s Kospi shed 0.9 percent.

As investors adjusted to the prospect of a weaker economy and lower long-term interest rates, the dollar fell to 111.11 yen from 112.36 yen. The euro rose to $1.1469 from $1.1368.

The British pound rose to $1.2671 from $1.2621. That sent the price of gold higher, and it gained 0.9 percent to $1,267.9 an ounce. Silver rose 0.3 percent to $14.87 an ounce and copper, which is considered an indicator of economic growth, fell 0.7 percent to $2.70 a pound.

Other fuel prices also fell. Wholesale gasoline lost 4.6 percent to $1.32 a gallon and heating oil slid 3.1 percent to $1.75 a gallon. Natural gas gave up 3.8 percent to $3.58 per 1,000 cubic feet. 
…

The U.S.-China trade war is spooking potential investors in soybean crushing plants planned for Wisconsin and New York state, developers said, casting doubt on the future of a sector that had been a rare bright spot in the U.S. farm economy.

Crushers in the United States have been posting near-record profits by snapping up cheap and plentiful soybeans no longer purchased by China and making soymeal and soy oil for export to Europe and Southeast Asia.

But margins are not predictable as the United States and China attempt to resolve their trade differences before a March 2 deadline, adding another puzzle as investors parse out the costs and impacts of a trade dispute between the world’s two largest economies.

WSBCP LLC, or the Wisconsin Soybean Crushing Plant, is struggling to find backers for the state’s first soy processing facility because of uncertainty in agricultural and financial markets over the trade conflict, said Phil Martini, chief executive of industrial contractor C.R. Meyer & Sons Co, who is overseeing the project.

“I’m not a mental giant, but it doesn’t take one to think people are uncertain about what’s going on,” Martini said. “The crush margin is very good, but it can go the other way.”

China bought about 60 percent of U.S. raw soybean exports last year in deals worth $12 billion, but has mostly been buying beans from Brazil since imposing a 25 percent tariff on American soybeans in July in retaliation for U.S. tariffs on Chinese goods.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping agreed on Dec. 1 not to impose additional tariffs for 90 days, a truce that spurred Chinese purchases of a few million tons of U.S. soybeans this month.

It is unclear when or if Beijing will remove its soy tariff, a move that would spur more deals and lift U.S. soybean prices in a boon to U.S. farmers and a blow to crushing margins.

Construction on the $150 million plant in Waupun, Wisconsin, is set to begin in 2019, with a projected opening in 2020, according to a June statement from the city, which owns the land where the facility would be located.

Martini said it remains to be seen whether the timetable needs to be postponed. He is also looking for livestock producers to commit to buying the plant’s products.

Kathy Schlieve, Waupun’s economic director, said the project would likely be delayed because the investor pool is not finalized.

“It’s different dynamic and we’re really trying to understand that,” Schlieve said about the trade war.

Shift from 2017

The uncertainty is a turnaround from last year when farmer-owned agricultural cooperatives were building new soybean crushing plants at the fastest rate in two decades after several years of large crops.

U.S. grain merchant Archer Daniels Midland Co set a new record for crush volumes in the third quarter and benefited from strong margins.

But after months of soybean futures prices hovering around 10-year lows due to the lack of Chinese buying, farmers have little room for new ventures.

“There isn’t a lot of extra money out there to invest in something like that,” said John Heisdorffer, an Iowa farmer and chairman of the American Soybean Association.

New York plant

The trade war also prolonged the search for investors for a $54 million soybean crushing plant that St. Lawrence Soyway Company is planning for Massena, New York, near the border with Canada, CEO Doug Fisher said.

Fisher tried to win over investors worried by the trade war with charts and graphs showing how the conflict improved margins for U.S. crushing plants.

“These tariffs with China rattle them, when in fact they have increased crush plant profits,” Fisher said.

As of Wednesday, the company had raised about 85 percent of the total, Fisher said.

St. Lawrence Soyway’s plant is projected to process soybeans into feed for dairy cows. The livestock industry has also been hit by Chinese tariffs on dairy products and pork, though.

“As those farmers are not doing as well, their ability to buy meal at higher prices is not there,” Fisher said.
…

A state of emergency has been declared in two eastern Sudan states after at least eight protesters were killed in mass demonstrations against rising prices.

Thousands of protesters marched in cities and towns across Sudan Thursday, angry over widespread corruption and the rising costs of basic goods, including bread.

Eyewitnesses in al-Qadarif said men wearing uniforms were among the protesters. Prices for food have skyrocketed in recent months, with inflation topping 60 percent. This comes after the government cut subsidies earlier this year.

Protesters there torched government buildings, including the headquarters of the ruling National Congress Party. Eyewitnesses in Atbara say the building was burned to the ground.

States of emergency were declared in the cities of al-Qadarif and Atbara.

Some of the Sudanese protesters are demanding a regime change. Many say they cannot earn a living or pay for basic needs like bread and fuel.

A Khartoum resident said students were planning to stage more protests Thursday around Khartoum University, but government security agents intervened and the students were ordered off the streets.

Police fired tear gas at hundreds of protesters within a kilometer of the presidential palace in Khartoum. Demonstrations were reported in Atbara, Port Sudan, Barbar, Nohoud and other cities.

The economy has deteriorated over the past several years after South Sudan became independent, depriving Khartoum of much of its oil revenue.

Carol Van Dam Falk and Kenneth Schwartz contributed.
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The independent U.S. central bank raised borrowing rates Wednesday for the fourth time this year, dismissing President Donald Trump’s contention that policymakers ought not tinker with the country’s robust economy, the world’s largest. 

The Federal Reserve board voted 10-0 after a two-day meeting to increase its benchmark short-term interest rate — which is the rate that banks charge each other on overnight loans to meet reserve minimums — by a quarter percentage point to a range of 2.25 percent to 2.5 percent, its highest point in a decade.  

But the Fed also took note of clouds on the horizon for the U.S. economy, saying it expected to increase rates again only twice in 2019, not three times as it had previously projected.

It also cut its 2019 economic growth forecast for the U.S. from 2.5 percent to 2.3 percent, both figures well off the 4.2 percent U.S. growth in the April-to-June period and the 3.5 percent figure from July to September. 

Stock prices have sunk 

Policymakers said they would closely watch “global economic and financial market developments and assess their implications for the economic outlook.” In the last several weeks, stock market indexes in the U.S. and elsewhere have fallen sharply, a plunge for some U.S. market indicators that wiped out all previous 2018 gains. 

The interest rate set by the Fed often affects borrowing costs throughout the U.S., for major corporations and consumers, and often sets the standard for global lending rates. 

Trump had no immediate comment on the latest boost in interest rates, but earlier in the week implored policymakers to forgo another increase: 

But central bank policymakers operate independently of White House oversight, and Wednesday’s quarter-point increase had been widely expected.

Trump has basked in a robust U.S. economy, even as numerous investigations engulf him and his 2016 presidential campaign, and key advisers have quit his administration or been forced out.

U.S. trade disputes are ongoing with China, and world stock market volatility has cut investor gains in recent weeks. But the 3.7 percent jobless rate is the lowest in the United States in 49 years, worker wages are increasing and consumers — whose activity accounts for about 70 percent of the U.S. economy — are spending. 

​Unhappy with Powell

But Jerome Powell, the Fed board member Trump named a year ago as chairman, had drawn the president’s ire by overseeing three interest rate hikes this year ahead of the latest one.

Trump last month said he was “not even a little bit happy” with his appointment of Powell.

Trump has said he thinks the Fed is “way off base” by raising rates, but has been powerless to stop it from boosting them. Central bank policymakers have raised interest rates to keep the inflation rate in check and keep the economy from expanding too rapidly. 

“I’m doing deals and I’m not being accommodated by the Fed,” Trump told The Washington Post last month. “They’re making a mistake because I have a gut and my gut tells me more sometimes than anybody else’s brain can ever tell me.”

Some economists are predicting, however, that the decade-long improving U.S. economy could stall in the next year or so and perhaps even fall into a recession, which, if it occurs, would in most circumstances call for cutting interest rates to boost economic activity. 
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The United States and China blamed each other for the crisis in the world trading system during a two-day “trade policy review” of the United States at the World Trade Organization.

The Chinese representative to the WTO, Hu Yingzhi, accused the United States of deforming the rules of world trade, which is having a detrimental impact on the economy and on American workers.

U.S. Ambassador to the WTO Dennis Shea retorted that the crisis was caused by China’s trade-distorting practices. He disputed the charge that the United States is the center of the crisis, saying instead that the U.S. is the epicenter of the solution.

WTO Trade Policy Review Division Director Willy Alfaro described the two-day debate as lively and engaged. He told VOA that member states expressed a number of concerns, including worry about a shift of focus in the U.S. trade policy, which is based on five pillars.

“The first one is the adoption of trade policies supporting the national security policy,” Alfaro said. “The second one is building a stronger U.S. economy and [third is] negotiating better trade deals, [fourth is] vigorous enforcement of domestic trade laws and rights under existing trade agreements, and finally reform of the multilateral trading system.” 

Alfaro said the U.S. has received a lot of support from member countries on the need to reform the multilateral trading system and to make it more transparent.

However, WTO officials said members also raised concerns regarding the introduction of new “Buy American” provisions, which could result in unnecessary trade barriers and increased protectionism. 

They also criticized U.S. agricultural policy, particularly the limited market access for certain commodities, high tariffs, and the continued use of trade distorting support.
…

Poland has signed a long-term deal with a U.S. company for supplies of liquefied natural gas as part of an effort to reduce its dependence on Russian energy, the two sides announced on Wednesday.

Port Arthur LNG, a subsidiary of San Diego-based Sempra Energy, and Poland’s state gas company PGNiG jointly announced the agreement for the sale of 2.7 billion cubic meters per year of gas to Poland over a 20-year period.

Their statement said that is enough to meet about 15 percent of Poland’s daily gas needs.

“This agreement marks an important step toward Poland’s energy independence and security,” the U.S. Secretary of Energy Rick Perry said.

Sempra Energy’s CEO Jeffrey Martin said the deal helps his company “advance our vision to become North America’s premier energy infrastructure company.”

No financial details were disclosed, in line with the secretive nature of gas deals, which are sensitive politically given Russia’s dominance of Europe’s energy market.

In recent weeks Poland also signed long-term deals for gas with American suppliers Cheniere and Venture Global Calcasieu Pass and Venture Global Plaquemines LNG.

These deals have been sealed as both Poland and the United States have been trying to stop Nord Stream 2, a pipeline under construction that, when finished, would transport gas from Russia to energy-hungry Germany.

Poland, along with several other European countries, see Nord Stream 2, which bypasses Ukraine, as a political project meant to weaken that country and gain leverage over Europe by making it more dependent on Russian gas.

Officials for the Nord Stream 2 dispute that view, saying it is merely a commercial project and would not cut off Ukraine, pointing to diversification of Europe’s gas market.

Also Wednesday, U.S. Deputy Secretary of State John Sullivan met with Polish Foreign Minister Jacek Czaputowicz in Warsaw, the last stop in a visit to several countries in the region.

Ahead of his visit the State Department said he would meet with Polish leaders to discuss shared concerns over Nord Stream 2, among other issues.

Czaputowicz told reporters in Warsaw that Nord Stream 2 is “harmful to the security of all of the European Union.”

He called Germany’s support for the project “anti-European” and also faulted Austria for using its six-month EU presidency, which ends this month, to keep the issue off Europe’s agenda.

 
…

Every Brazilian, including current and former members of the armed forces, will have to compromise under the next administration’s pension reform plan, a former general set to become government minister said in an interview.

Retired General Carlos Alberto dos Santos Cruz told Reuters in Brasilia last week that it was “inadmissible” in today’s world for some Brazilians employed in the public sector to retire in their 40s or 50s.

On December 4, right-wing President-elect Jair Bolsonaro said he planned to tackle the overhaul of Brazil’s fiscally burdensome pension system with piecemeal reforms that can pass Congress, starting with an increase in the minimum age of retirement.

Many economists say cuts to Brazil’s social security system are essential to controlling a huge federal deficit and regaining Brazil’s investment-grade rating.

“There are some professions that will need to cede some things, as is the case with the justice system workers, the prosecutor’s office, and all public sector employment,” Santos Cruz said. “The military is in the same situation. The idea of retirement, for example, is going to have to be tweaked.”

One of a group of former army generals who have become close advisers to Bolsonaro, Santos Cruz will be Bolsonaro’s main liaison with Congress, state and local governments, when he takes office on January 1.

Brazil would have to take a long hard look at the age people stop working in order to protect public finances, said Santos Cruz, who is 66.

Bolsonaro, a former army captain and staunch defender of Brazil’s 1964-1985 military dictatorship, had pledged to protect military pensions and retirement rights, but the realization that they are responsible for nearly half of the pensions deficit led his economic advisers to push him to rethink that stance. In recent comments, Bolsonaro has said he is willing to countenance a minimum age for military retirement.

Santos Cruz also said any austerity measures should be leveled against top-earning public workers, for whom the pain is relatively less, rather than lower paid employees.
…

Greek lawmakers approved the heavily indebted country’s budget for 2019 late Tuesday, the first since Greece exited an eight-year bailout program.

The budget lawmakers passed with a 154-143 vote still is heavy on austerity measures to ensure Greece registers a hefty surplus, in compliance with its debt relief deal with international creditors.

Earlier Tuesday, government spokesman Dimitris Tzanakopoulos said the proposed budget was Greece’s first in 10 years to be drafted “under circumstances of relative financial and political freedom” from bailout creditors.

“Today we have the opportunity to vote for a budget that now reflects the priorities of the Greek government, and not of [its] supervising institutions,” he said during a parliamentary debate.

As the debate drew to a close, more than 2,000 people demonstrated peacefully outside parliament in two separate protests called by labor unions.

The budget submitted by the left-led government foresees Greece’s battered economy growing 2.1 percent in 2018 and 2.5 percent in 2019. The debt load is set to decline from 180.4 percent of output this year to 167.8 percent next year.

Greece owes most of that debt to European partners and the International Monetary Fund. The debt relief deal secured favorable repayment terms, but in return the country must achieve budget surpluses for decades to come.

The country also secured a cash buffer from creditors so it would not have to tap bond markets until the rates demanded by investors to buy Greek government bonds drop.

Prime Minister Alexis Tsipras told lawmakers Tuesday that the country is not locked out of bond markets by high borrowing costs — even though his government has so far shelved stated plans to issue bonds shortly after the end of Greece’s last bailout, in August.

“[It] is a myth” that Greece can’t tap bond markets, Tsipras said. “You can be certain that we will again make a market exit, with a very good rate.”

Greece depended on bailout loans from 2010 until August 2018, and imposed crippling cutbacks to secure the money. Its finances are still subject to creditor scrutiny, albeit less intense than before.

Tsipras’ government is playing up citizen assistance programs that are intended to bring some 900 million euros in tax cuts and welfare benefits to less well-off Greeks. The money for the relief measures is supposed to come from a surplus generated by high taxes and constrained public spending.

However, labor unions say that’s not enough.

“Funding in the budget both for education and for health is much lower than our expectations,” Giannis Paidas, head of the Adedy civil servants’ union, said during the smaller of Tuesday’s two central Athens protests.

“It is the same and worse as during previous bailout-era years,” Paidas added. “There will be a 1 billion-euro increase in taxation. As you understand, this increase will burden working Greeks.”
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The finance committee of Mexico’s lower house of Congress on Tuesday rapidly approved the revenue section of President Andres Manuel Lopez Obrador’s 2019 draft budget, auguring speedy passage in the legislature his party controls.

Lopez Obrador’s leftist government only unveiled the budget proposal on Saturday night. It met with a positive initial response from financial markets, with investors warming to his commitment to keep a lid on spending.

The president’s National Regeneration Movement (MORENA) and its allies dominate Congress, having won the first outright majority in more than two decades.

Having been approved by the finance committee without changes, the revenue section is expected to go to the floor of the lower house on Tuesday afternoon. Once approved, the revenue budget proposal moves to the Senate.

The budget is a major test of Lopez Obrador’s credibility, which was shaken when he said on Oct. 29 he was scrapping a partly built $13 billion new Mexico City airport on the basis of a referendum that was widely panned as illegitimate.
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The World Bank has approved a $750 million loan guarantee for Ukraine, President Petro Poroshenko said on Twitter on Tuesday, calling it proof of his nation’s “tangible progress on the reform path.”

The World Bank, International Monetary Fund and other bodies support Ukraine with loan agreements conditional on Kiev passing reforms and tackling corruption. The IMF executive board was expected to meet later on Tuesday to approve a new stand-by loan deal for Ukraine worth $3.9 billion.
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Saudi Arabia plans to increase state spending by 7 percent next year in an effort to spur economic growth that has been hurt by low oil prices, according to a 2019 state budget announced by King Salman on Tuesday. Spending is projected to rise to an all-time high of 1.106 trillion riyals ($295 billion), from an actual 1.030 trillion riyals this year.

“We are determined to go ahead with economic reform, achieving fiscal discipline, improving transparency and empowering the private sector,” the king said in a nationally televised speech.

The economy shrank last year and, although the government estimates it grew 2.3 percent in 2018, that is much slower than the boom years early this decade — and not enough to put much of a dent in a record jobless rate of 12.9 percent among Saudis.

“The budget focuses on boosting activity after years of fiscal consolidation and weak growth,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

Because of the ramp-up in spending, the 2019 budget also appears to mark a slowing of Saudi Arabia’s drive to cut a big state budget deficit caused by the oil price slump.

The deficit, which the government has pledged to eliminate by 2023, came in at 136 billion riyals this year, well below the 195 billion riyal gap originally projected for 2018.

That was partly because of higher oil export revenues; Brent oil has averaged about $73 a barrel so far this year, up from $54 in 2017. But Riyadh also boosted non-oil revenues with tough austerity steps such as the imposition of a 5 percent value-added-tax at the start of 2018.

Next year, the government projects only a minimal further shrinking of the deficit to 131 billion riyals. Malik said her assumptions for Saudi gross domestic product and oil revenue suggested the deficit might actually widen back in 2019, to over 7 percent of GDP from near 4 percent.

Saudi Arabia does not disclose the oil price assumptions on which its planning is based, but Malik and some other private economists estimated the 2019 budget implied Brent at $70-71 per barrel with oil production at 10.2 million barrels per day.

Jean-Paul Pigat, head of research at Lighthouse Research in Dubai, said the budget’s increase in spending was lower than he had expected.

“Government spending is what ultimately drives growth in Saudi, and the wider region, and without stronger stimulus, it is difficult to see where the spark for stronger demand will come from,” he said.

However, Pigat added that more stimulus might come in the form of off-budget spending by the Public Investment Fund, the kingdom’s main sovereign wealth fund, which is embarking on multi-billion-dollar projects to develop Saudi Arabia’s tourism, entertainment and real estate industries.
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The European Union’s top diplomat called Tuesday on Kosovo to lift tariffs on goods from Serbia and Bosnia-Herzegovina as tensions rise between the former Serbian territory, and the EU and NATO.

Kosovo last month slapped a 100-percent tax on Serbian imports, apparently in retaliation after its bid to join the international police organization, Interpol, failed amid intense Serb lobbying.

EU foreign policy chief Federica Mogherini said that “it is in the interest of Kosovo to immediately revoke this decision.” She urged Pristina to settle its grievances through dialogue.

Kosovo broke away from Serbia in 2008 and unilaterally declared independence. Belgrade doesn’t recognize the move, nor do a small group of EU states, like Spain for example that fear that recognition might fuel breakaway tendencies in their own countries.

Mogherini’s appeal came as Kosovo’s prime minister accused her of mishandling EU-backed talks on normalizing ties with Serbia.

Ramush Haradinaj said the so-called Pristina-Belgrade dialogue led by Mogherini “has not given its expected products.”

He said that while Serbia is taking major steps toward the EU integration, Kosovo residents remain “in a ghetto,” not enjoying visa-free travel to EU countries even though it claims to have fulfilled the requirements.

A news conference planned between Mogherini and Haradinaj in Brussels on Monday was cancelled without reason. Mogherini said Tuesday it was because “we didn’t have any news to give,” and she noted that Haradinaj didn’t raise her handling of the talks with her.

Haradinaj has said his government will only lift the tariffs once Serbia recognizes Kosovo’s independence.

Mogherini, speaking alongside Serbian Prime Minister Ana Brnabic, expressed concerned about a return to conflict and warned that “the alternative to dialogue is very dangerous.”

NATO ambassadors, meanwhile, were weighing Tuesday Kosovo’s decision to transform its security force into an army.

Belgrade has warned that creating an army in a place it considers Serbian territory could result in an armed intervention.

But Kosovo’s parliament on Friday overwhelmingly approved the army’s formation in what President Hashim Thaci described as “an irreversible act.”

NATO and the EU have criticized the move, and NATO could reduce cooperation with Kosovo security services, although it seems unlikely to cut the number of troops in its own security force there, KFOR.

“There is a long-standing agreement that NATO will have to re-examine our level of engagement with the Kosovo Security Force, should its mandate evolve,” spokeswoman Oana Lungescu said in a statement.

She underlined that NATO’s KFOR will continue “to ensure a safe and secure environment.”
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