Category Archives: Business

economy and business news

IMF Forecasts Modest Pick-up in African Economic Growth; Critics Say Figures Pessimistic

Economic growth in sub-Saharan Africa is expected to rebound this year from 20-year lows in 2016, according to the International Monetary Fund’s biannual report. The Washington-based organization warns that, despite the modest recovery, public debt is continuing to rise and could soon become unsustainable in some African countries. Henry Ridgwell has more.

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Japan Deepens Economic Support for Philippines in Rivalry With China

Japan is deepening its influence in the Philippines to vie with regional rival China, a welcome boost for an infrastructure overhaul program in the relatively poor Southeast Asian country and for Japanese geopolitical ambitions.

Philippine President Rodrigo Duterte met Japanese Prime Minister Shinzo Abe earlier this week to discuss “concrete, time-bound and specific ways to further intensify bilateral cooperation,” the presidential website in Manila said.

Duterte is playing Japan off China, which last year out-pledged other countries with an offer of $24 billion in aid and investment, analysts say. China and Japan, which have a legacy of two-way political disputes, are vying for economic inroads as well as military cooperation in much of Southeast Asia.

“He’s playing one side off the other, and so he’s come to ‘why not?’” said Jeff Kingston, author and history instructor at Temple University Japan. “Japan is trying to draw on its old ties and ‘we’re a more reliable and trustworthy neighbor.’”

Duterte’s second trip to Tokyo

Duterte, in office since June 2016, made his second official Tokyo visit Oct. 30-31. His meeting with Abe included discussions of economic issues. Abe pledged 1 trillion yen ($8.8 billion) in economic support, according to media reports from Tokyo this week, doubling the amount that Japan offered in January.

The aid is expected to help the Philippines build rapid transit, bridges and improvements to a container port in the country’s third largest city, Cebu, said Jonathan Ravelas, chief market strategist with Banco de Oro UniBank, Metro Manila.

“On top of our agenda is vital support for the centerpiece projects,” Duterte said via the presidential office website, referring to a $167 billion, five-year program to overhaul public facilities as a way of fostering stronger economic growth.

Testing Chinese aid

The Philippines began accepting Chinese aid for infrastructure last year after the two sides agreed to set aside a maritime sovereignty dispute that had landed them in a world arbitration court under Duterte’s predecessor.

Beijing hopes its economic help around Southeast Asia will ease opposition to its dominance in that dispute, which covers most of the South China Sea and involves six governments. Some Filipinos worry that acceptance of Chinese aid will lead to compromising Philippine maritime sovereignty claims.

For the past four years, China has separately advanced a “One Belt, One Road” policy that extends infrastructure aid across Asia to advance Sino-foreign trade relations.

What’s in it for Japan

Japan is widely seen as competing with China for clout in the Philippines as well as other developing Asian countries.

Direct aid worldwide increased 12.7 percent last year over 2015 to $10.37 billion. The development aid also has a widening mandate, including “human security” and “sustainable development” based on individual country needs, the Japanese foreign ministry says on its website.

Japanese support for the Philippines tends to unfurl slowly compared to Chinese support, and often comes through private investment deals such as aquaculture in remote, undeveloped regions. Both countries offer concessionary loans.

“Foreign direct investment in the Philippines coming from Japan has been growing in the past six years, so I think closer cooperation between these countries is beneficial,” Ravelas said.

China and Japan still face unresolved issues from World War II as well as a dispute over islets in the East China Sea.

The East China Sea issue, plus wariness about Beijing’s grip on the South China Sea — a separate dispute not involving Japan — have prompted Tokyo to factor in freedom of navigation, rule of law and security when making aid calculations, University of Adelaide Asian studies professor Purnendra Jain wrote in a 2016 online commentary.

Japan, a staunch ally of Washington, also advocates a multicountry approach to development assistance. 

“Duterte was in town at [the] Japanese invitation and I think they wanted to convince him,” Kingston said.

​Japanese help for destroyed Philippine city

As part of Japan’s emphasis on human security, Abe offered $2 million to help the Philippines rebuild Marawi, Philippine media reported this week. Marawi is a southern city that was demolished during five months of fighting this year between Philippine troops and Muslim rebels.

“In the past the focus has mostly been on infrastructure and grants, but now there’s an effort to try to address human security issues like the roots of conflict, and terrorism,” said Maria Ela Atienza, political science professor at University of the Philippines Diliman.

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Pressure Mounts on Apple to Live Up to Hype for iPhone X

The iPhone X’s lush screen, facial-recognition skills and $1,000 price tag are breaking new ground in Apple’s marquee product line.

 

Now, the much-anticipated device is testing the patience of consumers and investors as demand outstrips suppliers’ capacity.

 

Apple said Thursday that iPhone sales rose 3 percent in the July-September quarter, a period that saw the iPhone 8 and 8 Plus come out in the final weeks. Sales could have been higher if many customers hadn’t been waiting for the iPhone X, which comes out Friday.

Apple shipped 46.7 million iPhones during the period, according to its fiscal fourth-quarter report released Thursday. That’s up from 45.5 million at the same time last year after the iPhone 7 came out, but represents a step back from the same time in 2015, when Apple shipped 48 million iPhones during the quarter.

 

As with recent quarters, one of the main sources of Apple’s growth is coming from its services, which are anchored by an app store that feeds the iPhone and other devices.

 

Revenue in that division surged 34 percent to $8.5 billion during the July-September period. All told, Apple earned $10.7 billion on revenue of $52.6 billion, compared with a $9 billion profit on revenue of $46.9 billion a year earlier.

 

Apple shares are up 3 percent in after-hours trading.

 

Nonetheless, the just-ended quarter largely became an afterthought once Apple decided to release the iPhone X six weeks after the iPhone 8.

“The Super Bowl for Apple is the iPhone X,” GBH analyst Daniel Ives said. “That is the potential game changer.”

 

But it also brings a potential stumbling block. While conspiracy theorists might suspect that Apple is artificially reducing supply to generate buzz, analysts say the real reason is that Apple’s suppliers so far haven’t been to manufacture the iPhone X quickly enough.

Making the iPhone X is proving to be a challenge because it boasts a color-popping OLED screen, which isn’t as readily available as standard LCD displays in other iPhone models. The new iPhone also requires more sophisticated components to power the facial-recognition technology for unlocking the device.

 

Even with the iPhone X’s delayed release, Apple is still struggling to catch up. Apple is now giving delivery times of five to six weeks for those ordering in advance online (limited supplies will be available in Apple stores for the formal release Friday). Most analysts are predicting Apple won’t be able to catch up with demand until early next year.

 

On Thursday, Apple predicted revenue for this quarter from $84 billion to $87 billion. Analysts, who have already factored in the supply challenges, expected $85.2 billion, according to FactSet.

 

Analysts are expecting Apple to ship 80 million iPhones during the current quarter, which includes the crucial holiday shopping season, according to FactSet. That would be slightly better than the same time last year.

 

Apple is counting on the iPhone X to drive even higher-than-usual sales during the first nine months of next year — a scenario that might not play out if production problems persist and impatient consumers turn instead to phones from Google or Samsung.

 

“What Apple needs to do is manage consumer expectations so they don’t get frustrated having to wait for so long for a new phone,” Ives said.

 

Analysts believe Apple can pull off the juggling act. They are expecting the company to sell 242 million iPhones in the fiscal year ending in September 2018 — the most in the product’s history. The previous record was set in 2015 when Apple shipped 231 million iPhones, thanks to larger models introduced just before the fiscal year began. By comparison, Apple shipped nearly 217 million iPhones in its just-completed fiscal 2017.

 

If Apple falters, investors are likely to dump its stock after driving the shares up by 45 percent so far this year on the expectation that the iPhone X will be the company’s biggest hit yet.

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Powell Brings Gift for Forging Consensus to Fed Job

As a choice to lead the Federal Reserve, Jerome Powell defies any recent mold.

He isn’t a trained economist. He’s produced no trail of research. He built a fortune as an investment manager.

Yet by the reckoning of Fed analysts — those who know him and those who don’t — Powell is equipped to lead the world’s most influential central bank, presiding over a U.S. economy on solid ground but hardly without risks.

 

What Powell brings to the position most of all, they say, are a formidable intelligence, an appreciation of intellectual diversity and a gift for forging agreement. And in five years on the Fed’s board of governors, he has schooled himself in monetary policy while becoming a specialist in areas from banking regulation to the U.S. payments system.

As a moderate who is expected to follow the cautious approach to interest rates of the current Fed chair, Janet Yellen, Powell could serve as a steadying force for the U.S. economy as well as a unifying figure among the central bank’s policymakers.

Looking for insights

“A consensus builder” is how Shai Akabas, who worked with Powell at the Bipartisan Policy Center, a public policy think tank, describes him. Powell was for two years a visiting scholar at the center — where, among other things, he focused on helping avert a crisis over raising the government’s debt ceiling — until he joined the Fed’s board in 2012. While at the think tank, it was Powell’s task to help convince congressional Republicans — successfully, in the end — that a default on the debt would be a catastrophe.

Akabas said Powell “was always trying to glean insights from those around him, and use that to form opinions.”

Educated at Princeton University with a law degree from Georgetown University, Powell, 64, known as Jay, spent many years in investment management — at Dillon Read and then at the Carlyle Group. His work there made him one of the wealthiest figures to serve on the Fed board: His most recent financial disclosure form places his wealth at between $19.7 million and $55 million. And based on how government disclosures are drafted, his wealth may actually be closer to $100 million.

Yet those who know him describe a man of unshowy modesty and collegiality, with little discernible pretension. Earlier this year at Reagan National Airport, Matthew McCormick, a government economist who was traveling with him, said he watched Powell carry a car seat and luggage for a family he saw was struggling to make a connecting flight.

At the Bipartisan Policy Center, Jason Grumet, who founded the center, recalls that the organization didn’t know what to expect from Powell, who had just finished several lucrative years at the Carlyle Group and had earlier held a high-level Treasury Department post. Yet Powell was content to take an unassuming office near the photocopier with a view of an alley.

“Jay dug in with the intensity of a young analyst,” Grumet said. “He was like a junior staffer.”

Focus on service

A Washington native, Powell has long shown an impulse toward federal policy and service. Early in his career at Dillon Read, he followed Dillon’s former chairman, Nicholas Brady, to President George H.W. Bush’s Treasury Department. Brady had become Treasury secretary, and Powell became undersecretary for finance.

His work at the Bipartisan Policy Center followed later in his career, and it led to his nomination by President Barack Obama to the Fed’s board.

In contrast to Powell, his predecessors Ben Bernanke and Yellen were nationally distinguished economists before their Fed chairmanships, with decades of research, papers and books attached to their names. In theory at least, they came to the Fed job prepared to lead the central bank’s response to unforeseen economic crises. No one knew, after all, that Bernanke would have to endure the stomach-churning threat to the financial system that forced him to preside over a raft of emergency actions to save the largest banks and, by extension, the economy.

What colleagues do know about Powell is that he won’t likely hesitate to rely on colleagues or advisers with deeper expertise. He is described as someone who believes deeply that differing opinions and backgrounds can help build common ground in public policymaking.

In a speech last year, took note of the value of having 12 Fed branches spread across the country. He suggested that the regional differences provide an array of views to help produce superior monetary policy.

“My strong view is that this institutionalized diversity of thinking is a strength of our system,” Powell said. “In my experience, the best outcomes are reached when opposing viewpoints are clearly and strongly presented before decisions are made.”

Powell, who projects a serious demeanor, is known for a lighter side as well. Friends say he strums rock and blues numbers on the guitar. He has been an avid golfer despite back pain.

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US Finds Canada Dumped Lumber, Sets Duties

The U.S. Department of Commerce on Thursday set final duties on Canadian softwood lumber after finding that imports had been being unfairly subsidized and dumped in the United States, escalating a trade dispute with Canada in the midst of NAFTA trade talks.

The decision imposed anti-dumping and anti-subsidy duties affecting about $5.66 billion worth of imports of the key building material.

Canada called the measures “unfair, unwarranted and deeply troubling” and said it was considering its options, including legal action through the North American Free Trade Agreement and the World Trade Organization.

The department said exporters from Canada had sold softwood lumber in the U.S. market at 3.20 percent to 8.89 percent less than fair value, and that Canada was providing unfair subsidies at rates of 3.34 percent to 18.19 percent.

The decision followed failed talks to end the decades-long lumber dispute between the neighbors.

“While I am disappointed that a negotiated agreement could not be made between domestic and Canadian softwood producers, the United States is committed to free, fair and reciprocal trade with Canada,” U.S. Commerce Secretary Wilbur Ross said.

“This decision is based on a full and unbiased review of the facts in an open and transparent process that defends American workers and businesses from unfair trade practices,” Ross said.

Government-owned land

The disagreement centers on the fees paid by Canadian lumber mills for timber cut largely from government-owned land. They are lower than fees paid on U.S. timber, which comes largely from private land.

The Canadian government argues that its fees are fair and says it is prepared to litigate the matter if a settlement cannot be reached.

“We urge the U.S. administration to rescind these duties, which harm workers and communities in Canada,” Canadian Foreign Minister Chrystia Freeland said in a joint statement with Canadian Natural Resources Minister Jim Carr.

“We will forcefully defend Canada’s softwood lumber industry, including through litigation, and we expect to prevail as we have in the past. We are reviewing our options.”

Jason Brochu, co-chair of the U.S. Lumber Coalition and president of Pleasant River Lumber Company, said U.S. lumber companies could now expand production to meet U.S. demand.

“The massive subsidies the Canadian government provides to their lumber industries have caused real harm to U.S. producers and their workers,” said Brochu.

The decision is likely to further escalate tensions between the United States and Canada during difficult negotiations between the United States, Canada and Mexico to modernize NAFTA.

In September, in the midst of the third round of NAFTA talks, the United States slapped preliminary anti-subsidy duties on Canadian jetmaker Bombardier’s CSeries jets after rival Boeing accused Canada of unfairly subsidizing the aircraft.

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Facebook Profit Soars, No Sign of Impact from Russia Issue

Facebook reported better-than-expected quarterly profit and revenue on Wednesday as it pushed further into video advertising, showing no sign of financial damage from the controversy over how Russia used the social network in an attempt to sway voters in the 2016 U.S. election.

The company’s shares, which hit a record earlier in the day, initially rose in after-hours trading, but later fell into negative territory. They have gained almost 60 percent this year.

Chief Executive Mark Zuckerberg condemned Russia’s attempts to influence last year’s election through Facebook posts designed to sow division, and repeated his pledge to ramp up spending significantly to increase the social network’s security, something he said on Wednesday would affect profits.

“What they did is wrong, and we are not going to stand for it,” Zuckerberg said of the Russians, on a conference call with analysts.

Facebook is at the center of a political storm in the United States for the ways it handles paid political ads and allows the spread of false news stories. U.S. lawmakers have threatened tougher regulation and fired questions at Facebook General Counsel Colin Stretch in hearings this week.

Facebook, in a series of disclosures over two months, has said that people in Russia bought at least 3,000 U.S. political ads and published another 80,000 Facebook posts that were seen by as many as 126 million Americans over two years. Russia denies any meddling.

Facebook’s total advertising revenue rose 49 percent in the third quarter to $10.14 billion, about 88 percent of which came from mobile ads.

Analysts on average had expected total ad revenue of $9.71 billion, according to data and analytics firm FactSet.

Facebook in the third quarter gave advertisers for the first time the ability to run ads in standalone videos, outside the Facebook News Feed, and the company is seeing good early results, Chief Operating Officer Sheryl Sandberg told analysts on a conference call.

“Video is exploding, and mobile video advertising is a big opportunity,” Sandberg said.

More than 70 percent of ad breaks up to 15 seconds long were viewed to completion, most with the sound on, she said.

The 49 percent increase in total ad sales in the latest quarter compares with a 47 percent rise in the prior quarter and a 51 percent jump in the first quarter.

Facebook has been warning for more than a year about reaching a limit in “ad load”, or the number of ads the company can feature in users’ pages before crowding their News Feed.

Advertisers seem unfazed, though, spending heavily as the social network continues to attract users.

The nearly 50 percent jump in ad revenue “is phenomenal, especially when for the past few quarters they’ve been trying to bring that expectation way, way down. Yet it keeps going up,” Tigress Financial Partners analyst Ivan Feinseth said.

Of the Russia scandal enveloping Facebook publicly, Feinseth said: “In the bigger picture, I don’t think it’s a really big factor.”

The company’s performance was strong in comparison with smaller social media firms Snap Inc and Twitter, Wedbush analyst Michael Pachter said.

“Facebook grew revenues by $3.3 billion year-over-year for the quarter. This is more than Twitter and Snapchat generate combined for the full year,” he said.

Facebook said about 2.07 billion people were using its service monthly as of Sept. 30, up 16 percent from a year earlier.

Analysts on average had expected 2.06 billion monthly active users, according to FactSet.

Net income rose to $4.71 billion, or $1.59 per share, from $2.63 billion, or 90 cents per share.

Analysts on an average were expecting the company to earn $1.28, according to Thomson Reuters I/B/E/S.

Total revenue increased 47.3 percent to $10.33 billion beating analysts estimate of $9.84 billion, according to Thomson Reuters I/B/E/S.

Various U.S. investigations into how Russia may have tried to sway American voters in the months before and after last year’s elections are hanging over Facebook and its competitors.

There is also proposed U.S. legislation that would extend rules governing political ads on television, radio and satellite to also cover digital advertising.

“We expect more scrutiny about Facebook’s ad system ahead,” analyst Debra Aho Williamson of research firm eMarketer said in a note. “We’re also monitoring for any signs that this investigation will have a material impact on ad revenue.”

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Trump Expected to Name Powell As New Fed Chief

President Donald Trump is expected to name Jerome Powell as the new head of the U.S. central bank.

Trump is scheduled to formally announce the pick Thursday in the White House Rose Garden.

“I think you will be extremely impressed by this person!” he teased in a Twitter post.

 

WATCH: Who Will Be the Next Fed Chief?

Sucessor to Yellen

The Wall Street Journal, citing unnamed sources, reported late Wednesday that White House officials have notified Powell that he will replace Federal Reserve Chair Janet Yellen when her term expires early next year. Other media outlets also said Powell is Trump’s choice.

Powell is one of the Federal Reserve’s governors. Analysts say he is a Republican centrist who appears inclined to continue the Fed’s strategy of gradually raising interest rates. The Journal story cautioned that Trump, who has praised Yellen recently, might still change his mind.

Powell would be a middle-ground pick for Trump, who is also considering current Fed Chair Yellen as well as Stanford University economist John Taylor and former Fed Governor Kevin Warsh.

Powell may relax rules

While Powell is expected to continue Yellen’s cautious approach to raising interest rates, economists say he might relax some of the financial rules designed to prevent another financial crisis like the one that caused chaos in the markets during the 2007-2008 recession. Trump has complained that those rules hurt banks and economic growth. Yellen, who was selected as Fed chair by President Barack Obama, has been an outspoken advocate for the stricter financial regulations that took effect in 2010.

Many conservative members of Congress had been pushing Trump to select Taylor, rather than Powell, for Fed chairman. Taylor, one of the country’s leading academics in the area of Fed policy, would likely embrace a more “hawkish’’ approach, more inclined to raise rates to fight inflation than to keep rates low to support the job market. Taylor is the author of a widely cited policy rule that provides a mathematical formula for guiding rate decisions. By one version of that rule, rates would be at least double what they are now.

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Exxon Promises Air Pollution Controls in Settlement with US Government

ExxonMobil has promised to upgrade pollution controls at eight of its manufacturing facilities along the U.S. Gulf Coast under an agreement it reached with federal authorities.

The petrochemical giant will spend about $300 million to install pollution controls at the plants to settle allegations that it violated U.S. environmental law by failing to properly monitor industrial flares at its petrochemical plants, resulting in illegal air pollution.

The U.S. Justice Department, in a statement, said the Exxon facilities — located in Louisiana and Texas — will operate new air pollution control and monitoring technology to reduce the harmful emissions.

“Once fully implemented, the pollution controls required by the settlement are estimated to reduce harmful air emissions of volatile organic compounds (VOCs) by more than 7,000 tons per year,” the DOJ said in a statement. “The settlement is also expected to reduce toxic air pollutants, including benzene, by more than 1,500 tons per year.”

The Justice Department describes VOCs as key components in the formation of smog, which can irritate lungs and inflame respiratory issues like asthma. Chronic exposure can lead to leukemia and adverse reproductive effects in women, the DOJ said.

Exxon also will be required to spend $1 million on a project to plant trees in Baytown, Texas, and purchase a $1.5 million mobile air quality monitoring vehicle for use by Louisiana’s environmental protection agency.

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Kushner Partner All But Kills Plan for Fifth Ave Skyscraper

The co-owner of a Fifth Avenue skyscraper controlled by the family of Jared Kushner says demolishing the tower to build luxury apartments is not practical and the building will likely remain as offices.

 

Vornado Realty Trust CEO Steven Roth told investors on Tuesday that the Kushner family’s plan to raise billions from investors to rebuild the tower is “not feasible.” He added that “it’s likely that the building will revert to an office building.”

The project drew criticism after media reports that the Kushner Cos. was negotiating with a Chinese insurer with ties to the ruling Communist Party, among other big foreign investors. Critics say such deals would raise conflicts of interest issues with Jared Kushner serving in the White House as an adviser to his father-in-law, President Donald Trump.

 

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