The International Monetary Fund announced Friday it had reached an agreement with Ukraine on economic policies that would unlock a new loan deal that will provide nearly $4 billion.

The new 14-month standby loan deal replaces an existing four-year financial aid package agreed in March 2015 and due to expire in five months, the IMF said in a statement.

The agreement must be approved by the IMF board, which will come later in the year after authorities in Kyiv approve a 2019 budget “consistent with IMF staff recommendations and an increase in household gas and heating tariffs,” a step the government had agreed on but never implemented.

But the deal also stresses the need for “continuing to protect low-income households.”

Ukraine Prime Minister Volodymyr Groysman had been seeking the additional financing from the Washington-based lender to help his crisis-hit nation.

Groysman on Friday announced a gas price increase of 23.5 percent to take effect November 1.

He said the “incredible efforts” of Ukrainian negotiators managed to reach a compromise with the IMF and reduce the initial demand to raise prices by 60 percent.

“If we are not able to continue cooperation with our international partners … this could lead to the country being put into default,” he said.

Ukraine has not received any money from the IMF since April 2017, when the fund released $1 billion for the cash-strapped country to repay loans. It had received less than $9 billion of the original $17.5 billion package.

Talks on economic reform measures that would satisfy IMF requirements and allow the release of further aid had been hung up for months, as the fund awaited the government’s approval of a budget, pension reform and an anti-corruption court.

A gas price hike is a sensitive issue for the cash-strapped country as its pro-Western leadership faces presidential and parliamentary elections in 2019.

The IMF said the new loan “will provide an anchor for the authorities’ economic policies during 2019.”

Building on progress under the previous financing package, the loan will “focus in particular on continuing with fiscal consolidation and reducing inflation, as well as reforms to strengthen tax administration, the financial sector and the energy sector,” the IMF said.

An IMF lifeline helped the country to recover from crises sparked by a Russian-backed war in the separatist industrial east that began in April 2014 and has claimed more than 10,000 lives.

The loss of industries in the war zone and flight of foreign investors saw the former Soviet republic’s economy shrink by 17 percent in 2014-2015.

The IMF now forecasts the economy will grow by 3.5 percent this year and 2.7 percent in 2019.

Following the announcement, debt rating agency Standard and Poor’s affirmed the country’s credit score at “B-” with a stable outlook.

“We expect the new arrangement will aid Ukraine’s efforts to cover sizable external debt obligations maturing next year, and also help to anchor macroeconomic policies through the 2019 presidential and parliamentary elections,” S&P said in a statement.

The IMF loan is also likely to unlock credit from other international donors, the ratings agency said.
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Several major Russian companies are exploring ways to do deals abroad without using dollars, spurred on by a U.S. threat to broaden sanctions that have impeded access of some Russian firms to the international banking system.

The Kremlin has been pushing companies to conduct more deals using other currencies to reduce reliance on the dollar.

Russian Alrosa, the world’s biggest producer of rough diamonds in carat terms, said it had completed a pilot deal with a Chinese client using yuan in the summer and another non-dollar transaction with an Indian client.

Other companies working on similar transactions include energy firm Surgutneftegaz, agricultural company Rusagro and miner Norilsk Nickel.

Russia’s central bank said this week the amount of non-dollar dealings was growing, with the share of rouble settlements in the Russia-China and Russia-India goods trade now between 10 and 20 percent.

The share was higher in the service industry, it added.

But there are limits to how much business can be shifted.

Major companies still rely heavily on dollar deals and most of Russia’s foreign earnings come from oil sales priced in dollars.

In addition, foreign banks with major U.S. activities may still be wary of business with any entity under U.S. sanctions even if transactions are not in dollars, bankers say.

The United States and its allies imposed sanctions on Russia in 2014 over Moscow’s annexation of Crimea. Washington said in August more measures could follow, after accusing Moscow of using a nerve agent against a former Russian agent and his daughter in Britain.

The new steps, which could be announced in November, may target dollar dealings, U.S. lawmakers have said.

Speed helps

One challenge facing companies dealing in the rouble is the Russian currency’s volatility. Between April 6 and 11, after Washington imposed sanctions on Russian billionaire Oleg Deripaska and some of his companies, the rouble lost almost 13 percent of its value against the dollar.

Alrosa said it avoided the fluctuation risk by completing the Chinese deal in a day. U.S. dollar deals tend to take longer due to associated compliance checks required.

“An increase in the speed of operations is an advantage in such an operation,” the company said in an emailed statement.

Alrosa did not give a value for its China and India deals but said the Chinese buyer had bought a lot at its auction of diamonds of 10.8 carats or larger in Hong Kong. Alrosa data indicates that its lots are on average worth about $100,000.

Alrosa said the banker for its Chinese deal was Shanghai office of VTB, Russia’s second-largest bank. An industry source, asking not to be named, said Russia’s biggest bank lender Sberbank worked on the Indian deal.

VTB and Sberbank declined to comment.

The Chinese client settled its purchase in yuan, which VTB converted into roubles and transferred to Alrosa.

“We carried out the transaction itself in one day, in several hours,” Alrosa said, adding that on this occasion the currency move was in the client’s favor.

No currency hedging was required because of the speed of the deal, the company said, but the client had to open an account in VTB’s branch in Shanghai to complete the transaction.

Alrosa said it was also considering settlement for future deals in Hong Kong dollars, adding that other Chinese clients had shown interest in non-dollar transactions.

Non-dollar limits

But there are limits on how much of Alrosa’s business can switch to other currencies. China accounts for just 4 percent of its sales, while India accounts for 17 percent.

Among initiatives by other Russian firms, Surgutneftegaz has been pushing buyers to agree to pay for oil in euros instead of dollars, Reuters reported in September.

Russian farming conglomerate Rusagro told Reuters that some of its trading operations were in yuan and said this would increase with the expansion of business with China.

Russian nickel and palladium producer Norilsk Nickel said it was discussing the option of rouble payments with foreign customers which have rouble revenue, although it said it had not secured deals under those terms.
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Hundreds of taxis on Thursday drove at a snail’s pace across the Polish capital Warsaw in protest at the ride-sharing app Uber and other unlicenced competitors.

Other cab drivers gathered in front of the justice ministry to call for legislation to regulate the industry.

Traditional cab operators argue that the Uber app and others like it represent unfair competition because their drivers can dodge the rules and restrictions that regulate professionals.

“There are 12,500 legal taxis in Warsaw and around 8,000 to 9,000 unregistered working for Uber, Taxify and a couple dozen other similar app-based operators,” said Jaroslaw Iglikowski, head of the Warsaw Taxi Drivers union.

“The app-based operators are taking around 30-35 percent of our overall business and up to 70 percent of night-time fares, especially on weekends,” he told AFP.

The protesting cab drivers claim in a petition they gave the justice minister that the country is losing more than 700 million zloty (160 million euros, $190 million) annually in unpaid taxes because of Uber and others like it.

The taxis dispersed in the early afternoon before rush hour, as the drivers had promised they would not cause traffic problems for city residents.

Uber has become one of Silicon Valley’s biggest venture-funded startups and has expanded its ride-sharing services to dozens of countries.

It does not employ drivers or own vehicles, but instead relies on private contractors using their own cars, allowing them to run their own business.

The app claims it is a service provider, connecting passengers with these freelance drivers directly and cheaply.

But critics and competitors around the globe say this allows it to flout costly regulations such as stringent licensing requirements for taxi drivers, who undergo hundreds of hours of training.

 
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U.S. Treasury Secretary Steve Mnuchin has pulled out of an investment conference next week in Saudi Arabia, as Riyadh continues to face questions about its involvement in the disappearance and alleged killing of a U.S.-based Saudi journalist in Turkey.

Mnuchin made the announcement Thursday on Twitter, following numerous Western corporate chiefs who have dropped out of the three-day gathering that starts Tuesday in Riyadh.

As reports from Turkey have mounted alleging Saudi agents tortured, killed and dismembered Jamal Khashoggi two weeks ago inside Riyadh’s consulate in Istanbul, the chief executives announced they will not be attending the Future Investment Initiative conference.

Saudi Arabia has denied killing Khashoggi, a critic of the country’s de facto leader, Crown Prince Mohammed bin Salman.

Khashoggi wrote about Saudi Arabia in columns for The Washington Post.

Saudi Arabia says it says it will disclose the results of its investigation into his disappearance.

The investment conference is being organized by Saudi Arabia’s mammoth sovereign wealth fund and was being billed as a showcase for economic reforms advanced by Salman as he attempts to diversify the kingdom’s economy, for decades focused on its role as the world’s leading oil exporter.

The gathering had been dubbed “Davos in the Desert,” after the annual meeting of world economic leaders in Switzerland.

International Monetary Fund managing director Christine Lagarde said she is skipping the conference. JP Morgan chief executive Jamie Dimon and the heads of two top U.S. investment firms — BlackRock and Blackstone — have dropped out of the gathering. Top executives at the Ford auto manufacturing company and the MasterCard credit company have said the won’t be going, while the Google internet search engine company said that the head of its cloud computing business also would not be at the event.

The chiefs of European bankers BNP Paribas, Credit Suisse, HSBC, Standard Chartered and Societe Generale also rescinded acceptances to the conference.

 
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The Trump administration has again declined to label China a currency manipulator, but says it is keeping China and five other nations on a watch list.

“Of particular concern are China’s lack of currency transparency and the recent weakness in its currency,” U.S. Treasury Secretary Steven Mnuchin said in his biannual report to Congress.

“Those pose major challenges to achieving fairer and more balanced trade and we will continue to monitor and review China’s currency practices, including thorough ongoing discussions with the People’s Bank of China,” he said.

Mnuchin said China — along with Germany, India, Japan, South Korea and Switzerland — would be placed on a list of countries whose currency practices require what the report calls “close attention.”

Governments manipulate currency by keeping the exchange rates artificially low to make its goods and services cheaper on the world market. 

But that puts trading partners and others at a disadvantage. President Donald Trump promised throughout the campaign to label China a currency manipulator once he got into office, but so far he has declined to do so.

Instead, Trump has imposed tariffs on billions of dollars’ worth of Chinese imports to address what he says are unfair trade practices and the trade deficit.
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Jubilant customers stood in long lines for hours then lit up and celebrated on sidewalks Wednesday as Canada became the world’s largest legal marijuana marketplace.

In Toronto, people smoked joints as soon as they rolled out of bed in a big “wake and bake” celebration. In Alberta, a government website that sells pot crashed when too many people tried to place orders.

And in Montreal, Graeme Campbell welcomed the day he could easily buy all the pot he wanted. 

“It’s hard to find people to sell to me because I look like a cop,” the clean-cut, 43-year-old computer programmer said outside a newly opened pot store.

He and his friend Alex Lacrosse were smoking a joint when two police officers walked by. “I passed you a joint right in front of them and they didn’t even bat an eye,” Lacrosse told his friend.

Festivities erupted throughout the nation as Canada became the largest country on the planet with legal marijuana sales. At least 111 pot shops were expected to open Wednesday across the nation of 37 million people, with many more to come, according to an Associated Press survey of the provinces. Uruguay was the first country to legalize marijuana.

Ian Power was first in line at a store in St. John’s, but didn’t plan to smoke the one gram he bought after midnight.

“I am going to frame it and hang it on my wall,” the 46-year-old Power said. “I’m going to save it forever.”

Tom Clarke, an illegal pot dealer for three decades, opened a pot store in Portugal Cove, Newfoundland, and made his first sale to his dad. He was cheered by the crowd waiting in line.

“This is awesome. I’ve been waiting my whole life for this,” Clarke said. “I am so happy to be living in Canada right now instead of south of the border.”

Promise of pardons

The start of legal sales wasn’t the only good news for pot aficionados: Canada said it intends to pardon everyone with convictions for possessing up to 30 grams of marijuana, the newly legal threshold.

“I don’t need to be a criminal anymore, and that’s a great feeling,” Canadian singer Ashley MacIsaac said outside a government-run shop in Nova Scotia. “And my new dealer is the prime minister!”

Medical marijuana has been legal since 2001 in Canada, and Prime Minister Justin Trudeau’s government has spent the past two years working toward legalizing recreational pot to better reflect society’s changing opinion about marijuana and bring black-market operators into a regulated system.

Corey Stone and a friend got to one of the 12 stores that opened in Quebec at 3:45 a.m. to be among the first to buy pot. Hundreds later lined up.

“It’s a once-in-a-lifetime thing — you’re never ever going to be one of the first people able to buy legal recreational cannabis in Canada ever again,” said Stone, a 32-year restaurant and bar manager.

Shop in stores, online

The stores have a sterile look, like a modern clinic, with a security desk to check identification. The products are displayed in plastic or cardboard packages behind counters. Buyers can’t touch or smell the products before they buy. A small team of employees answer questions but don’t make recommendations.

“It’s a candy store, I like the experience,” said Vincent Desjardins, a 20-year-old-student who plans to apply for a job at the Montreal shop.

Canadians can also order marijuana products through websites run by provinces or private retailers and have it delivered to their home by mail.

At 12:07 a.m., the Alberta Liquor and Gaming Commission tweeted: “You like us! Our website is experiencing some heavy traffic. We are working hard to get it up and running.”

Alberta and Quebec have set the minimum age for purchase at 18, while other provinces have made it 19.

No stores will open in Ontario, which includes Toronto. The nation’s most populous province is working on its regulations and doesn’t expect stores to operate until spring.

A patchwork of regulations has spread in Canada as each province takes its own approach within the framework established by the federal government. Some provinces have government-run stores, others allow private retailers, and some have both.

Canada’s national approach allows unfettered banking for the pot industry, inter-province shipments of cannabis and billions of dollars in investment — a sharp contrast with prohibitions in the United States, where nine states have legalized recreational sales of pot and more than 30 have approved medical marijuana.

Bruce Linton, CEO of marijuana producer and retailer Canopy Growth, claims he made the first sale in Canada — less than a second after midnight in Newfoundland.

“It was extremely emotional,” he said. “Several people who work for us have been working on this for their entire adult life and several of them were in tears.”

Linton is proud that Canada is now at the forefront of the burgeoning industry.

“The last time Canada was this far ahead in anything, Alexander Graham Bell made a phone call,” said Linton, whose company recently received an investment of $4 billion from Constellation Brands, whose holdings include Corona beer and Robert Mondavi wines.
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Electric auto brand Tesla Inc. said it signed an agreement Wednesday to secure land in Shanghai for its first factory outside the United States, pushing ahead with development despite mounting U.S.-Chinese trade tensions.

Tesla, based on Palo Alto, California, announced plans for the Shanghai factory in July after the Chinese government said it would end restrictions on full foreign ownership of electric vehicle makers to speed up industry development.

Those plans have gone ahead despite tariff hikes by Washington and Beijing on billions of dollars of each other’s goods in a dispute over Chinese technology policy. U.S. imports targeted by Beijing’s penalties include electric cars.

China is the biggest global electric vehicle market and Tesla’s second-largest after the United States.

Tesla joins global automakers including General Motors Co., Volkswagen AG and Nissan Motor Corp. that are pouring billions of dollars into manufacturing electric vehicles in China.

Local production would eliminate risks from tariffs and other import controls. It would help Tesla develop parts suppliers to support after service and make its vehicles more appealing to mainstream Chinese buyers.

Tesla said it signed a “land transfer agreement” on a 210-acre (84-hectare) site in the Lingang district in southeastern Shanghai.

That is “an important milestone for what will be our next advanced, sustainably developed manufacturing site,” Tesla’s vice president of worldwide sales, Robin Ren, said in a statement.

Shanghai is a center of China’s auto industry and home to state-owned Shanghai Automotive Industries Corp., the main local manufacturer for GM and VW.

Tesla said earlier that production in Shanghai would begin two to three years after construction of the factory begins and eventually increase to 500,000 vehicles annually.

Tesla has yet to give a price tag but the Shanghai government said it would be the biggest foreign investment there to date. The company said in its second-quarter investor letter that construction is expected to begin within the next few quarters, with significant investment coming next year. Much of the cost will be funded with “local debt” the letter said.

Tesla’s $5 billion Nevada battery factory was financed with help from a $1.6 billion investment by battery maker Panasonic Corp.

Analysts expect Tesla to report a loss of about $200 million for the three months ending Sept. 30 following the previous quarter’s $742.7 million loss. Its CEO Elon Musk said in a Sept. 30 letter to U.S. securities regulators that the company is “very close to achieving profitability.”

Tesla’s estimated sales in China of under 15,000 vehicles in 2017 gave it a market share of less than 3 percent.

The company faces competition from Chinese brands including BYD Auto and BAIC Group that already sell tens of thousands of hybrid and pure-electric sedans and SUVs annually.

Until now, foreign automakers that wanted to manufacture in China were required to work through state-owned partners. Foreign brands balked at bringing electric vehicle technology into China to avoid having to share it with potential future competitors.

The first of the new electric models being developed by global automakers to hit the market, Nissan’s Sylphy Zero Emission, began rolling off a production line in southern China in August.

Lower-priced electric models from GM, Volkswagen and other global brands are due to hit the market starting this year, well before Tesla is up and running in Shanghai.
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An Uber driver in New York City kidnapped a woman who fell asleep in his vehicle, groped her in the back seat and then left her on the side of a highway in Connecticut, federal authorities said Tuesday.

Harbir Parmar, 24, of Queens was charged in U.S. District Court with kidnapping. It wasn’t immediately clear whether he had an attorney.

The FBI said in court papers that Parmar picked the woman up in Manhattan at 11:30 p.m. on Feb. 21 for a trip to her home in White Plains, New York, about an hour away. The woman fell asleep, authorities said, and Parmar changed her destination to an address in Boston, Massachusetts.

The woman woke up to find the driver “with his hand under her shirt touching the top of her breast,” according to a criminal complaint unsealed Tuesday.

The woman reached for her phone, the complaint said, but Parmar took it from her and continued driving. She asked the driver to take her to the police station but the Parmar refused, the complaint said.

Parmar eventually left the woman on the side of Interstate 95 in Branford, Connecticut, about an hour’s drive east of her home. The complaint said the woman memorized Parmar’s license plate and called a cab from a nearby convenience store.

The woman later learned that Uber had charged her more than $1,000 for a trip from New York to Massachusetts.

Federal authorities and New York police condemned Parmar’s behavior as reprehensible.

“No one — man or woman — should fear such an attack when they simply hire a car service,” U.S. Attorney Geoffrey Berman said in a statement.

Uber said it blocked Parmar from using the app when the alleged kidnapping occurred.

“What’s been reported is horrible and something no person should go through. As soon as we became aware, we immediately removed this individual’s access to the platform. We have fully cooperated with law enforcement and will continue to support their investigation,” the company said in a statement.

The company’s CEO, Dara Khosrowshahi, said over the summer that he hoped to make Uber the “safest transportation platform on the planet,” after enduring years of criticism that it wasn’t doing enough to screen drivers. That included adding a new feature to the app that is supposed to alert both passengers and drivers if a car makes an unplanned stop.

The state of Colorado fined Uber $8.9 million last year for allowing people with criminal records to work as drivers. New York City requires ride-hailing service drivers to go through a licensing process similar to the one it has for traditional limo and car service drivers.

Federal authorities also charged Parmar with wire fraud, accusing him of overcharging Uber riders by inputting false information about their destinations.

The complaint said he also reported “false information” about cleaning fees that he charged to Uber riders on at least three occasions, including the woman he allegedly groped and left on the side of the road.
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The White House has announced plans to negotiate separate trade deals with Britain, the European Union and Japan.

“We are committed to concluding these negotiations with timely and substantive results for American workers, farmers, ranchers and businesses,” U.S. Trade Representative Robert Lighthizer said Tuesday.

He added that the White House wanted to “address both tariff and non-tariff barriers and to achieve fairer and more balanced trade.”

As required by law, Lighthizer sent three separate letters to Congress announcing the intention to open trade talks.

He wrote that the negotiations with Britain would begin “as soon as it’s ready” after Britain’s expected exit from the European Union on March 29.

Lighthizer called the economic partnership between the U.S. and EU the “largest and most complex”in the world, noting the U.S. has a $151 billion trade deficit with the EU

Writing about Japan, Lighthizer said it is “an important but still often underperforming market for U.S. exporters of goods,” noting that Washington also has a large trade deficit with Tokyo.

The top Democrat on the Senate Finance Committee, Oregon’s Ron Wyden, cautioned the administration against making what he called “quick, partial deals.” 

“The administration must take the time to tackle trade barriers comprehensively, including using this opportunity to set a high bar in areas like labor rights, environmental protection and digital trade,” he said.

President Donald Trump imposed tariffs on European steel and aluminum exports earlier this year and has threatened more tariffs on cars as a reaction to what he said were unfair deals that put the U.S. at a disadvantage.
…

Major U.S. stock markets made strong gains Tuesday as strong earnings reports encouraged investors.

The Dow Jones industrial average gained 547.87 points, or 2.2 percent, to close at 25,798.42. The Standard & Poor’s 500 rose 59.13 points, or 2.2 percent, to 2,809.92 with all 11 sectors finishing higher. The Nasdaq composite, home to many tech stocks, jumped 214.75 points, or 2.9 percent, to 7,645.49.

New U.S. economic data showing gains in job openings and industrial production also helped buoy prices.

Tuesday’s Dow gain marked a sharp turnaround from some recent trading sessions, when worries about rising interest rates sent stock market indexes down steeply.

Those concerns also pushed down the value of European stocks, but the major indexes in France, Germany and Britain also posted gains Tuesday. 

 
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Concerns about debt diplomacy on China’s expansive infrastructure megaproject — the Belt and Road — have become an increasing source of debate from Asia to Africa and the Middle East. In recent weeks, more than $30 billion in projects have been scrapped and other loans and investments are under review.

Public opposition is also testing the resolve of ruling authorities from Hanoi to Lusaka, the capital of Zambia, as concerns about Chinese investment build.

In late August, Malaysia’s newly elected Prime Minister Mahathir Mohamad canceled more than $20 billion in Belt and Road projects for railway and pipelines, and Pakistan lopped another $2 billion off plans for a railway following a decision late last year to cancel a $14 billion dam project, citing financial concerns. Nepal canceled its dam project last month and Sierra Leone announced last week that it was dropping an airport project over debt concerns.

In some countries such as Vietnam, it is just the idea of Chinese investment — against the backdrop of the Belt and Road — that has led to push back.

Following public protests, Vietnam recently decided to postpone plans for several special economic zones.

Several Belt and Road projects have seen setbacks in countries where debt concerns have coincided with political elections and a change of power — be it Pakistan, Malaysia or the Maldives, says economist Christopher Balding.

“The people in these countries are very worried about the level of debt that these countries are taking on in regard to China and I think that is very important to note,” Balding said. “It’s not just anti-China people that are driving this, but that there is a lot of concern on the ground in the countries about that.”

China says there are no political strings attached to its investments and loans. It also argues it is providing funding in places others will not. But Beijing’s takeover of a port in Sri Lanka last year and the sheer volume of Chinese investments along the Belt and Road project have done little to ease those concerns.

String of ports

Late last year, according to the New York Times, China agreed to forgive Sri Lanka’s debt in exchange for a 99-year lease of Hambanthota Port and 15,000 acres of surrounding land.

The government of Sri Lanka denies it divested land to a Chinese company, but the deal has convinced some that China is setting up debt traps to then take over the infrastructure that Chinese state-run companies build.

Hambanthota is one of 42 ports where China has participated in construction and operations, with more on the horizon.

In 2021, China will take over operation of one of Israel’s largest ports in Haifa. Beijing is also being eyed as a possible candidate for the development of Chabahar port in Iran, which is near the Iran-Pakistan border.

The port proposal remains in limbo, however, due to U.S. sanctions. And that’s not the only obstacle, according to David Kelly, research director at the Beijing-based group China Policy.

“It’s in the driest and most remote part of Iran,” Kelly said. “It looks like a real loser commercially, unless it handles a lot of oil.”

Analysts say the Middle East, with its oil money and deep pockets, is less at risk for debt traps.

However, the port that is most likely to follow in Sri Lanka’s footsteps is Djibouti, a strategically important country on the Horn of Africa, where China recently established its first overseas military base.

According to official figures, Djibouti’s debt is more than 88 percent of the GDP and China owns $1.4 billion of that. That kind of debt overhang could lead to the same type of concessionary agreements as in Sri Lanka, analysts note.

Debt traps

A report released earlier this year by Washington, D.C.-based Center for Global Development said 23 of the 68 countries where China is investing for Belt and Road projects are at high risk of debt distress. Another eight, including Djibouti, are vulnerable to debt distress linked to future projects.

China argues its investments are aimed at boosting trade and commerce and giving developing countries a leg up.

China Policy’s Kelly says places where the debt situation is more critical are countries such as land-locked and poverty-stricken Zambia. There, concerns are causing a very public push for the government to disclose the full burden of Chinese debt.

“The upset and upheaval in Zambia recently, where you’ve got African civil society coming out and making this case,” Kelly said, “That is always going to be more significant where you have the local people, making a local case.”

BRI indigestion

Oh Ei Sun, a senior fellow with the Singapore Institute of International Affairs, says cancellations and changes are what he calls Belt and Road indigestion.

Concerns about debt traps and debt diplomacy will not have an impact on China going forward, he says, but stops, starts and cancellations will continue.

Oh says China’s model of development — build infrastructure and the economy will grow — may have worked at home, but it doesn’t always fit along the Belt and Road.

“In many of these Belt and Road initiative countries, if you lay out the infrastructure, it doesn’t automatically mean that trade and investment will take place,” Oh said, “Some of these projects will have to be more attuned to the local requirements of particular countries.”
…

The U.S. government’s budget deficit hit $779 billion in the fiscal year that ended Sept. 30, while spending increased and tax revenues remained nearly flat, the Treasury said Monday.

It was the biggest deficit since 2012, and $113 billion more than the figure a year ago. The 2018 deficit amounted to 3.9 percent of the country’s more than $18 trillion annual economy, up from 3.5 percent last year.

The government’s deficit spending boosted the country’s long-term debt figure to more than $21 trillion, forcing the government to pay an extra $65 billion last year in interest on money the government has had to borrow to run its programs.

In all, government spending rose by $127 billion last year, while tax collections increased by $14 billion.

The Treasury said the annual deficit rose partly because corporate tax collections dropped by $76 billion after Congress approved cuts in tax rates for both businesses and individuals that were supported by President Donald Trump.

Mick Mulvaney, the government’s budget director, said the country’s “booming economy will create increased government revenues — an important step toward long-term fiscal sustainability. But this fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending.”
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Zimbabwe’s government says the country is emerging from a recent economic meltdown that saw shops run out of goods and motorists spend long hours in lines at gas stations. Economists say Zimbabwe’s crisis is not over, as people have no confidence in the currency or in President Emmerson Mnangagwa’s government.

For weeks now, there have been long and winding queues at most fuel stations in Zimbabwe, as the precious liquid has been in short supply. Lameck Mauriri is one of those now tired of the situation.

“We are really striving but things are tough to everyone,” said Mauriri. “I do not know how those in rural areas, how they are surviving, especially if in Harare it is like this. We are sleeping in fuel queues. There is not fuel, there is no bread, there is no drink. There is no everything. No cash, no jobs.”

For a decade, the country has been without an official currency and relied on U.S. dollars, the British pound and South African rand to conduct transactions. In the past three years, however, all three currencies have been hard to find, paralyzing the economy.

The introduction of bond notes — a currency Zimbabwe started printing two years ago to ease the situation — has not helped.

The bond notes were supposed to trade at par with the U.S. dollar; but, on the black market, a dollar now is now equal to close to three bond notes.

Prosper Chitambara, an economist of the Labor and Economic Development Research Institute of Zimbabwe says the bond notes are partly to blame for the price increases and shortages in the country.

“What is lacking in the economy, in the market is confidence. There is a distrust of the formal economic system,” said Chitambara. “The bond notes have definitely contributed a great deal to the current economic situation, a fallacy economic situation. What they have done is for example to increase money supply in the economy. And that money supply is not actually backed by significant productivity in the economy. That actually gives rise to general of inflationary pressures.”

He said the government’s recent introduction of a 2 percent tax on all electronic transactions pushed prices even higher and caused some shops to close.

Ndabaningi Nick Mangwana, Zimbabwe’s secretary in the Ministry of Information and Publicity, says the situation in the country is normal and there is no need for alarm.

“There is no shortage to oil itself, there is no challenge in terms of production of all these essential services,” said Mangwana. “That is why they are there if you go. There were a few people who panicked, closed a couple of shops, but those opened within hours. There was fake news and people panicked, but it is all under control.”

That is not exactly what seems to be the case on the ground. Some shops remain closed and prices continue rising. Long fuel lines remain the order of the day. 
…

The United States still aims to cut Iran’s oil sales to zero and does not expect restored oil sanctions against Tehran to have a negative impact on a market that is well-supplied and balanced, a senior U.S. official said on Monday.

U.S. special envoy for Iran, Brian Hook, was talking to reporters after a visit to India, a major importer of Iranian oil, and talks with officials from France, Britain and Germany before the start of a new round of U.S. sanctions on Nov. 4.

The three European countries have been trying to save the 2015 nuclear deal between Tehran and multiple global powers since U.S. President Trump announced in May that the United States would withdraw from the pact.

In a conference call from Luxembourg, where Hook was meeting European officials, he said that Iran uses oil revenue to support and fund terrorist proxies throughout the Middle East and that the U.S. goal is for countries to cut Iranian oil imports to zero as quickly as possible.

“We are working with countries that are reducing their imports to ensure that this happens,” he said.

Hook declined to answer questions on possible waivers on sanctions for countries that are reducing their imports but said the U.S. is confident that energy markets will remain stable.

“We are seeing a well-supplied and balanced oil market right now. We should focus on these fundamentals and not be distracted by the emotional and unbalanced claims coming from Tehran.”

Iran, OPEC’s third-largest producer, has repeatedly said that its oil exports cannot be reduced to zero because of high demand in the market.

Washington, meanwhile, plans to continue coordinating with oil producers and maintain U.S. supply.

“Our crude oil production increased by 1.65 million barrels in August compared to one year ago and that is expected to continue rising by as much as 1 million barrels a day within the next year,” he said.

Hook also said that European efforts to create a special purpose vehicle for trade with Tehran would find no demand because more than 100 foreign firms have indicated that they would be leaving the country.
…

More Americans are moving to smaller cities in search of a better quality of life.

They’re leaving places like Los Angeles, Chicago and New York for mid-sized cities such as Phoenix and Las Vegas, according to an analysis of data from the U.S. Census Bureau.

A huge draw for these second-tier cities is that the cost of housing consumes a much smaller chunk of people’s salaries. According to the U.S. Census Bureau, more than half of the people who move do so for housing-related reasons. They’re looking for a new or better home, cheaper housing, or to buy a home rather than rent.

It costs about $4,100 a month to rent a place in Manhattan. That’s almost two-thirds of New York City’s median household income of $83,500. Buying a home is even more out of reach. The average cost of a home in the area is $1.1 million.

More than half a million people left the New York boroughs of Manhattan, the Bronx, Brooklyn, and Queens over a five-year period between 2012 and 2017.

In Los Angeles, the metropolitan county with the largest outbound net domestic migration, rent costs about $2,100 a month — about 38 percent of average income. Houses cost around $630,000, almost 10 times the average annual salary of $66,000.

LA County lost about 381,000 people over a five-year period.

According to the report, the cost of living can be a lot less expensive in the Phoenix area, which welcomed more net domestic newcomers over the past five years — 221,000 people — than any other part of the country.

The average household income in Phoenix is about $63,000, rent is about $1,100 a month, and the median price of a house is $280,000 — that’s $350,000 less than in the LA metropolitan area.

In the Las Vegas area, the rent ($1,000) will only consume 21 percent of the average salary ($57,000) and purchasing a house would set a buyer back about $273,000.

The analysis found that housing is about two times cheaper in the top markets that attracted people than in the areas that are losing the most in terms of population.

Chicago appears to be an exception. People are leaving the Windy City to get away from high taxes. Property taxes are higher there than almost anywhere else in the United States.

It is not as though the places that are losing people are suffering due to the exodus. Eight of the 10 counties with the biggest net population losses are still growing overall because of births and immigration.
…

Sears has filed for Chapter 11 bankruptcy protection, buckling under its massive debt load and staggering losses. 

Sears once dominated the American retail landscape. But the big question is whether the shrunken version of itself can be viable or will it be forced to go out of business, closing the final chapter for an iconic name that originated more than a century ago.

Holdings will also close 142 unprofitable stores near the end of the year. Liquidation sales at these stores are expected to begin shortly. This is in addition to the previously announced closure of 46 unprofitable stores that is expected to be completed by November 2018.

The company, which started out as a mail order catalog in the 1880s, has been on a slow march toward extinction as it lagged far behind its peers and has incurred massive losses over the years. The operator of Sears and Kmart stores joins a growing list of retailers that have filed for bankruptcy or liquidated in the last few years amid a fiercely competitive climate. Some like Payless ShoeSource have had success emerging from reorganization in bankruptcy court but plenty of others haven’t, like Toys R Us and Bon-Ton Stores Inc. Both retailers were forced to shutter their operations this year soon after a Chapter 11 filing. 

“This is a company that in the 1950s stood like a colossus over the American retail landscape,” said Craig Johnson, president of Customer Growth Partners, a retail consultancy. “Hopefully, a smaller new Sears will be healthier.”

Given its sheer size, Sears’ bankruptcy filing will have wide ripple effects on everything from already ailing landlords to its tens of thousands of workers. 

Edward S. Lampert has stepped down from his role as CEO of the company, effective immediately. He will remain chairman of the board. The company’s board has created an Office of the CEO, which will be responsible for managing day-to-day operations during this process.

The filing, which is happening ahead of the crucial holiday shopping season, comes after rescue efforts engineered by Lampert have kept it outside of bankruptcy court – until now. 

Lampert, the largest shareholder, has been loaning out his own money for years and has put together deals to prop up the company, which in turn has benefited his own ESL hedge fund.

Last year, Sears sold its famous Craftsman brand to Stanley Black & Decker Inc., following its earlier moves to spin off pieces of its Sears Hometown and Outlet division and Lands’ End.

In recent weeks, Lampert has been pushing for a debt restructuring and offering to buy some of Sears’ key assets like Kenmore through his hedge fund as a $134 million debt repayment comes due on Monday. Lampert personally owns 31 percent of the company’s shares. His hedge fund has an 18.5 percent stake, according to FactSet.

“It is all well and good to undertake financial engineering, but the company is in the business of retailing and without a clear retail plan, the firm simply has no reason to exist,” said Neil Saunders, managing director of GlobalData Retail, in a recent analyst note.

Sears’ stock has fallen from about $6 over the past year to below the minimum $1 level that Nasdaq stocks are required to trade in order to remain on the stock index. In April 2007, shares were trading at around $141. The company, which once had 350,000 workers, has seen its workforce shrink to fewer than 90,000 people as of earlier this year.

The company has racked up $6.26 billion in losses, excluding one-time events, since its last annual profit in 2010, according to Ken Perkins, who heads the research firm Retail Metrics LLC. It’s had 11 years of straight annual drops in revenue. In its last fiscal year, it generated $16.7 billion in sales, down from more than $50 billion in 2008.

As of May, it had fewer than 900 stores, down from about 1,000 at the end of last year. The number of stores peaked in 2012 at 4,000, including its Sears Canada division that was later spun off.

In a March 2017 government filing, Sears said there was “substantial doubt” it would be able to keep its doors open – but insisted its turnaround efforts would mitigate that risk. 

But its losses continued into this year. In the fiscal second quarter ended Aug. 4, net losses in the quarter swelled to $508 million, or $4.68 per share, compared with a loss of $250 million, or $2.33 cents per share in the same quarter a year ago. 

Such financial woes contrast with the promise that Lampert made when he combined Sears and Kmart in 2005, two years after he helped bring Kmart out of bankruptcy. Back then, it operated 2,200 stores in total.

Lampert pledged to return Sears to greatness by leveraging its best-known brands and its vast holdings of land, and more recently planned to entice customers with a loyalty program. But it struggled to get more people through the doors or to shop online. 

Jennifer Roberts, 36 of Dayton, Ohio, had been a long-time fan of Sears and has fond memories of shopping there for clothes as a child. But in recent years, she’s been disappointed by the lack of customer service and outdated stores. 

“My mom had always bought her appliances from Sears. That’s where my dad got his tools,” she said. “But they don’t care about their customers anymore.” 

She said a refrigerator her mother bought at Sears broke after two years and it still hasn’t been fixed for almost a month with no help from the retailer. 

“If they don’t value a customer, then they don’t need my money,” said Roberts, who voiced her complaints on Sears’ Facebook page. 

Sales at the company’s established locations tumbled nearly 4 percent during its fiscal second quarter. Still, that was an improvement from the same period a year ago when it fell 11.5 percent. Total revenue dropped 30 percent in the most recent quarter, hurt by continued store closings. 

The bleak figures are an outlier to chains like Walmart, Target, Best Buy and Macy’s, which have been enjoying stronger sales as they benefit from a robust economy and efforts to make the shopping experience more inviting by investing heavily on remodeling and de-cluttering their stores.

For decades, Sears was king of the American shopping landscape. Sears, Roebuck and Co.’s iconic catalog featured items from bicycles to sewing machines to houses, and could generate excitement throughout a household when it arrived. The company began opening retail locations in 1925 and expanded swiftly in suburban malls from the 1950s to 1970s. But the onset of discounters like Walmart created challenges for Sears that have only grown. Sears faced even more competition from online sellers and appliance retailers like Lowe’s and Home Depot. Its stores became an albatross.

Store shelves have been left bare as many vendors have demanded more stringent payment terms, says Mark Cohen, a professor of retailing at Columbia University and a former Sears executive.

Meanwhile, Sears workers are nervous about what kind of severance they’ll receive if their store closes.

John Germann, 46, works full-time and makes $14 per hour as the lead worker unloading merchandise from trucks at the Chicago Ridge, Illinois store, which has been drastically reducing its staff since he started nine years ago. Germann now has only 11 people on his team, compared with about 30 a few years ago. 

“We’re doing the job of two to three people. It’s not safe,” he said. “We’re lifting treadmills and refrigerators.”

Real estate experts believe that Sears’ move to further shutter stores as part of its restructuring would be a mixed blessing for landlords. For the healthy malls, landlords would welcome a Sears departure, allowing them to cut up the space and fill it with several smaller successful stores that combined would bring in higher revenue. 

But for the struggling malls, Cohen says it will be a “death knell” since it will be harder for them to bring in new tenants. Many of these malls already have had difficulty filling in the void from J.C. Penney and Macy’s closures. 

Saunders of GlobalData Retail spared no criticism of Sears in his analyst note, listing failing after failing of the company.

“The problem in Sears case is that it is a poor retailer,” he wrote. “Put bluntly, it has failed on every facet of retailing from assortment to service to merchandise to basic shop keeping standards. Under benign conditions, this would be problematic enough but in today’s hyper-competitive retail environment it is a recipe for failure on a grand scale.” 
…

An increase in world oil prices is helping Vietnam earn money that will quicken its already fast economic growth and may help the country build new infrastructure. The only red light: higher fuel prices among Vietnam’s consumers.

Vietnam, though not a major oil-producing nation like much of the Middle East, has counted energy-related commodities as its fifth highest source of exports. The industry is largely state-owned, including energy supplier PetroVietnam, with $3.1 billion in annual sales. Much of Vietnam’s energy comes from under the seas off its east and south coasts.

If crude oil prices hold at an average $65 per barrel this year, above last year’s average of US$60, economic growth will exceed the 6.7 percent target set by the legislature, the Communist Party of Vietnam’s website said last week. 

“Vietnam has a huge level of natural gas reserves and a level of oil, so if the prices go up that would definitely be a boon for Vietnam,” said Ralf Matthaes, founder of the Infocus Mekong Research consultancy in Ho Chi Minh City.

“It would be another benefit for Vietnam, that look, Vietnam has more exports. It’s not just about coffee and rice,” he said.

World oil price hikes

The Vietnamese Ministry of Finance forecasts that total state revenue from crude oil exports will reach $3.13 billion in the first nine months of 2018, up 42.5% over the same period last year. The total for January through September would beat a full-year target.

The revenue increases for Vietnam reflect higher income from oil sales worldwide. World prices should reach $73 per barrel within the year and $74 next year, per estimates by the U.S. Energy Information Administration. Prices have gone up, the administration says, because of supply issues, including reports that U.S. sanctions on Iran will cut purchases.

“For the government and their state-owned enterprise PetroVietnam, it’s definitely good news,” said Frederick Burke, partner with the law firm Baker McKenzie in Ho Chi Minh City. “They’ve been really strained by that sort of weakness in their budget portfolio.”

Vietnam exports oil largely to Australia, China, Japan, Malaysia, Singapore and Thailand. Those sales contribute to a $224 billion economy that has grown by around 6 percent every year since 2012. Much of the growth comes from foreign-invested factories that make items such as auto parts and consumer electronics.

Vietnam will export around 11.23 million tons of crude oil this year, the Communist Party says. 

What to do with the money

Oil revenue would give the government more funding for public infrastructure, Matthaes said. Vietnamese officials are building transport infrastructure so manufacturers can better move exports from factory floors to overseas markets. Ease of cargo shipping will help keep producers in Vietnam, which competes with China and much of Southeast Asia to win factory investment.

The government is spending now on expressways and urban mass transit to handle what the domestic news website VnExpress International calls “the country’s logistics shortcomings.” 

State-owned enterprises might eventually build more oil refineries, as well, Burke suggested. Despite export revenues, Vietnam is a net importer of refined oil products because onshore refineries cannot meet the demands of a 95 million population along with industry.

Vietnam imports about 70 percent of its fuel for actual usage, mostly from China, Malaysia, Singapore, South Korea and Thailand. 

Officials want to build more refineries to ensure Vietnam always has a steady fuel supply, Burke said. But he said a global “overcapacity” of refineries has cast doubt on ideas about opening more refineries in the country.

Inflation threat

Reliance on imports will raise the price of what common Vietnamese people pay for fuel, a threat to inflation, analysts and domestic media predict. Gasoline prices will rise 5 to 15 percent and may increase inflation by up to 0.64 percent over the year, the Communist Party says.

Officials in Hanoi set an inflation target of 4 percent for this year, but as of June it had already gone higher. Low prices help foreign investors as well as the millions of common motor scooter riders who still live in poverty.

Common consumers “feel the heat,” said Trung Nguyen, director of the Center for International Studies at Ho Chi Minh University of Social Sciences and Humanities. “They are used to the oil price rise, so I think that they can still withstand it, but I don’t know how far they can.”
…

World stocks are climbing Friday after two days of sharp losses. Major U.S. stock indexes are up more than 1 percent, but they’re still on track for their biggest one-week loss since late March.

Technology and internet companies were some of the hardest hit over the last two days and they led the market higher Friday. Apple climbed 2.7 percent to $220.18. Consumer-focused companies also rallied, as Amazon jumped 3.8 percent to $1,783.96 and Netflix surged 4.7 percent to $336.30.

The S&P 500 index climbed 37 points, or 1.4 percent, to 2,766 at 9:45 a.m. Eastern time. The benchmark index tumbled 5.3 percent over the past two days and as of Thursday it had fallen for six consecutive days. The S&P is down 5.6 percent from its latest record high, set Sept. 20.

The Dow Jones Industrial Average jumped 305 points, or 1.2 percent, to 25,358. The Nasdaq composite surged 138 points, or 1.9 percent, to 7,467. The Russell 2000 index gained 17 points, or 1.2 percent, to 1,563. That index, which is made up of smaller and more U.S.-focused companies, has fallen into a 10 percent “correction” since reaching a record high at the end of August.

On the New York Stock Exchange, winners outnumbered losers eight to one.

Stocks in Europe and Asia also recovered some of their recent losses. The French CAC 40 and the DAX in Germany both rose 0.8 percent while Britain’s FTSE 100 was 0.7 percent higher. Japan’s Nikkei 225 index gained 0.5 percent after sinking early in the day and following a nearly 4 percent loss on Thursday. Hong Kong’s Hang Seng surged 2.1 percent and the Kospi in South Korea rose 1.5 percent.

The market’s recent losing streak started when strong economic data and positive comments from Federal Reserve Chair Jerome Powell helped set off a wave of selling in the bond market. Investors were betting that the U.S. economy would keep growing at a healthy pace. The sales pushed bond prices lower and yields higher. That drove interest rates sharply higher, which worried investors who felt that a big increase in interest rates could eventually stifle economic growth. Higher yields also make bonds more appealing to investors versus stocks.

The worst losses went to stocks that have led the market in recent years, including technology companies, as well as companies that do better when economic growth speeds up, like industrial firms.

Banks rose as they began to report their third-quarter results. Citigroup jumped 2.4 percent to $70.04. Last year’s corporate tax cut and rising interest rates have helped banks make more money.

Bond prices turned lower as the stock market stabilized. The yield on the 10-year Treasury note rose to 3.16 percent from 3.13 percent.

High-dividend stocks lagged the rest of the market, and utilities and household goods makers were little changed. Those stocks held up a bit better than the rest of the market over the last six days. Investors view them as relatively safe, steady assets that look better when growth is uncertain and the rest of the market is in turmoil.

U.S. crude oil added 0.6 percent to $71.43 a barrel in New York. Brent crude, the international standard, was up 0.6 percent to $80.77 a barrel in London.

The dollar rose to 112.17 yen from 111.94 yen. The euro fell to $1.1548 from $1.1594.
…

Just in case any of the global central bankers and finance ministers gathered in Indonesia missed the message delivered repeatedly this week, the host nation said it again Friday: Everyone stands to lose if trade wars are allowed to escalate.

Indonesian President Joko Widodo didn’t mention the United States or China, the world’s two largest economies, but it was clear who he was talking about in an address to the plenary session of the International Monetary Fund and World Bank meetings on the island of Bali.

“Lately it feels like the relations among the major economies are becoming more and more like Game of Thrones,” Widodo said in a speech peppered with references to the HBO series about dynasties and kingdoms battling for power.

“Are we so busy fighting with each other and competing against each other that we fail to notice the things which are increasingly threatening, all of us alike, rich and poor, large and small,” he said.

Poorer and populous emerging market countries like his are among the most vulnerable to the fallout from the ongoing U.S.-Sino tariff war, and rising U.S. interest rates that are drawing investors away and driving down currencies.

“All these troubles in the world economy, are enough to make us feel like saying: ‘Winter is coming,'” Widodo said, using a phrase that characters in the popular fantasy series constantly repeat to refer to spectral dangers that could destroy them all.

With rivalry growing in the world economy, Widodo said “the situation could be more critical compared to the global financial crisis 10 years ago.”

The market ructions have now cascaded through to developed markets with Wall Street extending a slide into a sixth session on Thursday amid the trade war fears.

The United States and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other’s goods over the past few months.

The tariffs stem from the Trump administration’s demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a politically sensitive U.S. goods trade surplus.

Rubbing salt in U.S. wounds, China reported on Friday an unexpected acceleration in export growth in September and a record $34.13 billion trade surplus with the United States.

Mnuchin: China trade talks must include yuan

In an interview with Reuters, U.S. Treasury Secretary Steven Mnuchin said that he told China’s central bank chief that currency issues need to be part of any further U.S.-China trade talks and expressed his concerns about the yuan’s recent weakness.

Mnuchin also said that China needs to identify concrete “action items” to rebalance the two countries’ trade relationship before talks to resolve their disputes can resume.

The U.S. Treasury chief and People’s Bank of China Governor Yi Gang extensively discussed currency issues on the sidelines of the meetings in Bali.

Mnuchin’s comments on China’s currency come ahead of next week’s scheduled release of a hotly anticipated Treasury report on currency manipulation, the first since a significant weakening of yuan began this spring.

Mnuchin said re-launching trade talks would require China to commit to taking action on structural reforms to its economy.

If the relationship could be rebalanced, he said the U.S.-China total annual trade relationship could grow to $1 trillion from $650 billion currently, with $500 billion of exports from each country.

G-20 members and trade issues

Meanwhile, the chairman of a meeting of finance leaders from the Group of 20 leading industrialized and emerging economies admitted that the trade tensions within the group could only be solved by the countries directly involved.

“The G-20 can play a role in providing the platform for discussions. But the differences that still persist should be resolved by the members that are directly involved in the tensions,” Nicolas Dujovne, Argentina’s Treasury Minister, told a news conference after chairing the G-20 meeting in Bali.

More than 19,000 delegates and other guests, including ministers, central bank heads and some leaders, were attending the IMF-World Bank meetings, and Widodo asked them to “cushion the blows from trade wars, technical disruption and market turmoil.”

“I hope you will each do your part to nudge our various leaders in the right direction,” Widodo said, adding that “confrontation and collision impose a tragic price.”

The IMF’s twice-yearly report on the Asia Pacific region, released Thursday, warned that the market rout seen in emerging economies could worsen if the Federal Reserve and other major central banks tightened monetary policy more quickly than expected.

At Friday’s plenary, IMF managing director Christine Lagarde estimated that the escalation of current trade tensions could reduce global GDP by almost one percent over the next two years.

IMF forecasts of global economic growth for both 2018 and 2019 were cut to 3.7 percent, from 3.9 percent in its July forecast.

“Clearly, we need to de-escalate these disputes,” Lagarde told the plenary session.
…

Elon Musk replied with a tweet saying “This is incorrect” after the Financial

Times reported that outgoing Twenty-First Century Fox Inc. Chief Executive James Murdoch was the lead candidate to replace him as Tesla Inc. chairman.

Tesla has until Nov. 13 to appoint an independent chairman of the board, part of settlements reached last month between Tesla, Musk and U.S. regulators after Musk tweeted in August that he had secured funding to take the electric car maker private.

The SEC settlement capped months of debate and some investor calls for stronger oversight of Musk, whose recent erratic public behavior raised concerns about his ability to steer the money-losing company through a rocky phase of growth.

The U.S. Securities and Exchange Commission, which said Musk’s tweeted statements about going private were fraudulent, allowed the billionaire to retain his role as CEO while requiring he give up his chairmanship.

Musk had said he was considering taking Tesla private at a price of $420 a share, a number that is slang for marijuana. He tweeted the three-word denial of the Financial Times story on Wednesday at 4:20 pm PDT (2320 GMT), about six hours after the newspaper’s post.

In a vote of confidence for Musk, shareholder T. Rowe Price Group Inc. said in a regulatory filing on Wednesday that it had raised its stake to 10.2 percent at the end of September from just under 7 percent in June.

The Financial Times cited two people briefed on discussions saying Murdoch was the lead candidate for the job. Murdoch, already an independent director of Tesla, has signaled he wants the job, the report said.

The son of Fox mogul Rupert Murdoch, he joined Tesla’s board last year after years of work with media companies. He has no experience in manufacturing and has never led a company that makes cars or electric vehicles.

Murdoch could not immediately be reached for comment. Tesla did not respond to a request for comment. Twenty-First Century Fox declined to comment.

​Board roles

Musk is the public face of Tesla, and any chairman would have to contend with his powerful personality. Thanks to his vision and audacious showmanship, Tesla’s valuation has at times eclipsed that of established U.S. automakers with billions in revenues, and the company has garnered legions of fans, despite repeated production issues.

“The question when it comes to James Murdoch is, ‘Is he the guy who’ll be able to establish that level of authority with Elon Musk?’ ” asked Abby Adlerman, CEO of Boardspan, a corporate governance consulting company.

Murdoch, who at 45 is a near contemporary of 47-year-old Musk, recently navigated a takeover battle between Fox and Comcast Corp. to buy European pay-TV company Sky, which he also chaired.

His record in ensuring Sky’s independent shareholders were represented throughout was exemplary, media analyst Alice Enders said.

“His experience is very recent and very relevant,” she said.

Investor concerns that Tesla’s board was too closely tied to Musk led to the company’s addition of two independent directors, including Murdoch, in July 2017.

Earlier this year, leading U.S. proxy advisers Glass Lewis & Co. and Institutional Shareholder Services and union-affiliated investment adviser CtW Investment Group had recommended investors cast votes “against” the re-election of Murdoch as a Tesla director at the company’s annual meeting held on June 5.

While CtW cited a lack of relevant experience and a “troubled history as an executive and director,” both proxy firms warned that Murdoch already served on too many boards.

Murdoch currently serves on the boards of Twenty-First Century Fox and News Corp. He stepped down from Sky Plc on Tuesday following the completion of Comcast’s takeover of the broadcaster.

He was appointed chief executive of Sky, founded by his father, in 2003, becoming the youngest CEO of a FTSE 100 company.

“Under his leadership, Sky went down the technology route,” Enders said. “It’s no accident he oversaw that strategy, which was really distinct from the strategy other pay-TV companies followed, and in my view was his most valuable contribution.”

Murdoch replaced his father as chairman of Sky in 2007, but was forced out in 2012 after being embroiled in Britain’s phone-hacking scandal. He returned to Sky’s board in 2016 after rebuilding his career at Fox.
…

Parties to a new global treaty to combat the illicit sale of tobacco products have taken the first steps toward cracking down on this multi-billion dollar trade.  At a three-day meeting at the headquarters of the World Health Organization in Geneva they have outlined a plan to shut down the lucrative black market trade in tobacco.

A global tobacco treaty (Protocol to Eliminate Illicit Trade in Tobacco Products) entered into force on September 25, with 48 countries joining the new protocol, which is part of the WHO Framework Convention for Tobacco Control (FCTC).  Two-thirds of the parties have enacted or strengthened national legislation aimed at tackling illicit trade in tobacco products.

Parties attending the meeting have set up a working group to create a monitoring system to track and trace the movement of tobacco products. They hope this global information sharing system will be up and running by 2023.  

Head of the FCTC Secretariat, Vera da Costa e Silva, says illicit trade accounts for one in 10 cigarettes consumed.  She says these cigarettes are low-priced and more affordable for young people and vulnerable populations.  She says this results in increased consumption of the toxic product by these groups.

She told VOA the black market in tobacco thrives in both rich and poor countries, but it is a much bigger problem in developing countries.

“In the streets of developing countries, you can see all over the world sales of illicit trade of tobacco products.  They are openly in their markets…. When it comes to the distribution, this is linked to street sales, to bootlegging as well through borders and even to sales to and by minors.  That is a real problem of illicit trade in tobacco products,” she said.

Da Costa e Silva said this flourishing illegal trade undermines tobacco control policies and public health.  She said it also fuels organized crime and increases tobacco profits through tax evasion, resulting in substantial losses in governments’ revenues.   

She said studies show governments lose $31 billion in taxes annually from the illegal trafficking in tobacco products.  

The World Health Organization reports seven million people die prematurely every year from tobacco-related causes.

 
…

One of Donald Trump’s top economic advisers says the president is not trying to improperly influence the U.S. central bank.

The director of the National Economic Council, Larry Kudlow, spoke to the television network CNBC a day after Trump said the U.S. Federal Reserve is “loco” (crazy) for raising interest rates. On Thursday, Trump continued his attacks on the central bank, calling the Fed “out of control,” but denied he has plans to fire Fed Chair Jay Powell. 

Kudlow said, “We all know the Fed is independent. The president is not dictating policy to the Fed.”  

The Federal Reserve slashed the benchmark interest rate nearly to zero in an emergency, temporary effort to boost economic growth hurt by a severe recession 10 years ago. Since then, the economy has stopped shrinking and resumed growth, unemployment has fallen to historic lows, and wages and inflation have begun to rise modestly.  

Low interest rates boost growth by making it cheaper for businesses and families to borrow money to build factories or buy homes.  Economists warn that keeping interest rates too low for too long could spark strong inflation that pushes up prices and wages so sharply that they damage the economy.  

To fend off inflation, the Fed has been slowly raising rates a quarter of a percentage point at a time. They are expected to continue this effort to gradually return rates to their historic averages.

A common conflict grows out of the fact that incumbent elected politicians get the blame if the economy is not growing strongly. That gives presidents and others a political incentive to keep interest rates low, regardless of the consequences.  

That is why central banks in the United States and elsewhere are often set up to be insulated from political pressure — so they can make decisions based on economic merit rather than potential popularity.

When the independence of a central bank is seriously questioned, markets and currencies can fall, because investors lose confidence in the economic management of a nation.

U.S. stock markets fell sharply again Wednesday with the benchmark Dow Jones industrial average off nearly 550 points, a drop of more than 2 percent.

This was the second sharp loss for U.S. stocks in as many days, with a total loss for the Dow at more than 1,300 points. Many key European and Asian stock indexes also declined. 
…

More than half of the world’s population lives in cities, according to United Nations figures.  By the middle of this century, 68 percent of the world will be urbanized, adding 2½ billion people to global cities.  The growth will bring problems, including lack of housing, and,  as Mike O’Sullivan reports, some ballooning urban regions already face a housing crisis.
…

The trade war between the United States and China has made for a nerve-wracking summer of uncertainty in Wisconsin, where manufacturing has long been in decline yet remains a vital part of the state’s economy.

At Johnson Level and Tool in suburban Milwaukee, the Trump administration’s thrust-and-parry trade moves with China and other countries have left the company bracing for up to $3.7 million in extra costs annually because of higher tariffs on imports, including some of its levels that are made in China.

The company has a range of options to try to blunt its higher costs — from raising prices on the levels it sells to big box stores to potentially moving some of its manufacturing now done in China to another country to avoid tariffs.

But as companies across America struggle to adapt to the higher prices from import taxes, the options that officials at Johnson Level and Tool face underscore there are no easy answers — and no surefire way to avoid paying more for indispensable imports. As Trump’s tariffs on countless U.S. imports take root, some of the largest U.S. corporations have warned that higher prices are coming.   

For many such companies, a key internal question is whether to absorb the higher costs themselves, at least temporarily, to avoid losing customers — or raise prices immediately. Johnson Level has chosen to raise its prices for the stores that buy its products by 8 percent to 10 percent to match its higher costs imposed by the tariffs.

Levels are a basic tool essential for things like getting doorways square and hanging pictures straight. Though Johnson manufactures some of its levels in Mequon, it imports others that are cheaper to make in China because their tooling machines cost just one-tenth what they do in the U.S., said Paul Buzzell, the company’s chief financial officer. About half of the levels the company sells are imported from China.

The uncertainty over how long the tariffs will remain in place has made it harder to find a solution, Buzzell said. He said he always assumed that if the U.S. increased tariffs, it would give businesses a year or two to prepare by making adjustments with their suppliers.

That was the assumption, he said, when the company “started investing in our suppliers and relationships in China.”

“We have this uncertainty, and almost overnight our business really has changed and so the competitive landscape is different,” Buzzell said.

The first tariffs on Chinese steel and aluminum in June didn’t affect Johnson Level; the company doesn’t import those raw materials. But in July, a second round of tariffs on $50 billion worth of Chinese imports covering hundreds of items, including all the levels and laser levels the company imports, meaning they were now paying 25 percent more for those.

Despite its decline over the years, manufacturing still plays a central role in Wisconsin’s economy, making the survival of companies like Johnson Level essential to the state.

About 16 percent of Wisconsin’s workforce is in manufacturing — second only to Indiana, according to the National Association of Manufacturers . And global trade — whether involving manufacturing, farming or other industries — supports about 800,000 jobs in the state, according to the advocacy group U.S. Chamber of Commerce . That’s roughly a quarter of the state’s total workforce.

In business since 1947, Johnson Level and Tool sells levels and measuring tools to stores nationwide, including Home Depot, Menards, Lowe’s and Ace Hardware.  

Buzzell said some of his customers, whom he declined to name, have already balked at suggested price increases. One business customer that he said accounted for about $2 million in Johnson’s annual sales found another supplier shortly after Johnson raised its prices, Buzzell said.

Margaret Smith, a spokeswoman for Home Depot, said the company works “with suppliers to mitigate impact on customers.” She said she couldn’t elaborate.

Buzzell said the company, which employs about 100 people, has no plans to reduce staff. He wouldn’t disclose Johnson Level’s annual revenue, saying only that it’s under $50 million. Buzzell said one option likeliest to succeed — but also the costliest — would be for the company to find another country not subject to tariffs that can manufacture what it needs. Johnson Level has discussed that possibility, including making in the U.S. what it now imports from China, but it would entail a complex and time-consuming process.

‘Uncertainty’ reigns

“This is a classic example of uncertainty,” Buzzell said. “We’re questioning, should we treat these tariffs as a long-term thing that’s never going away.”

On the other hand, he said, the company must make pivotal decisions even knowing that the Trump administration could rescind its tariff increases at any time.

“You don’t really know what to do,” Buzzell said.

The uncertainty over how long the tariffs will stay is making decisions difficult for other companies that import products from China as well.

“The big question is, nobody knows how long they’ll be in place, so it’s hard making changes,” Austin Ramirez, the CEO of Husco International, said in an interview.

The Wisconsin-based Husco makes hydraulic and electro-mechanical components for cars and uses machines and metal from China.

“This is costing us a fortune,” Ramirez told U.S. Sen. Ron Johnson at a meeting with business leaders in July. Ramirez said the company was incurring about a million dollars a month more in expenses because of the Trump tariffs. Husco International makes roughly a half-billion in total revenue, Ramirez said.   

Husco International does about half its business overseas, with plants in Asia and Europe. The company also has about 100 manufacturing jobs in the U.S. for exports to other countries, but retaliatory tariffs on U.S. exports means those jobs could move elsewhere, Ramirez said.

“Those jobs are at risk because I can move them to overseas plants that aren’t subject to these tariffs,” Ramirez told Johnson.

At Regal Ware, a company that makes pots, frying pans and cast aluminum cookware, $2 million in profits could vanish if tariffs remain in place this year, said Doug Reigl, a vice president at the Wisconsin-based company.

Reigl said the company will consider moving production overseas “or look for ways to take costs out of operations here in the U.S.” if the tariffs stay.  

While layoffs may not be imminent at manufacturing companies, hiring could face a slowdown, said Dr. Joseph Daniels, chairman of the economics department at Marquette University.

“I would say what’s at risk is actually job creation,” Daniels said.

That’s a concern Buzzell shares.

“It’s not going to shut us down,” he said of the tariffs. “But what it does, it theoretically takes away money to invest in long-term projects.”

 
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