The Dow Jones Industrial Average topped 27,000 for the first time on Thursday as the top three equity benchmarks traded higher on Wall Street after Federal Reserve Chairman Jerome Powell signaled the central bank was still moving towards an interest rate cut due to trade uncertainties.
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Following several days of uneven trading activity over concerns that the Federal Reserve would withhold moving forward on the expected cuts, investors were optimistic after Powell’s remarks that the central bank’s outlook for the U.S. economy is weighed down by trade tensions.
Many Federal Open Markets Committee participants “saw that the case for a somewhat more accommodative monetary policy had strengthened," he said in prepared testimony for the House Financial Services Committee.
Powell is back on Capitol Hill for a second round of testimony, this time before the Senate.
Powell also said a strong June jobs report did not change the central bank's economic outlook or policy on interest rates. He is scheduled to testify in front of a Senate panel on Thursday.
In economic news, initial claims for state unemployment benefits declined 13,000 to a seasonally adjusted 209,000 for the week ended July 6, the lowest level since April, the Labor Department said.
Shares of technology companies will be active after the French government on Thursday approved a new tax on those firms amid a probe into the measure by the U.S. government. The 3 percent tax on companies with roughly $845 million in global revenue and $281 million in digital sales in France will take effect retroactively to the start of 2019.
Meanwhile, investors are eagerly awaiting a July 31 policy meeting to see if the Federal Reserve moves forward with the rate cuts.
In company earnings news, shares of Delta Air Lines surged on better-than-expected results for the second quarter. Profits at the Atlanta-based carrier rose 32 percent to $2.35 per share, as revenue grew to $12.5 billion.
Top White House officials had “constructive” talks with Chinese Vice Premier Liu He and Minister Zhong Shan earlier this week and a face-to-face meeting is possible.
The training, which will be voluntary, expands upon Amazon's existing programs and initiatives. The idea is to help Amazon(AMZN) employees progress into more advanced jobs or even new positions outside of the company. It will be available to 100,000 workers by 2025, according to the report.
Under the plan, workers could use the training to transfer between positions they might not have been qualified for. For example, warehouse workers in fulfillment centers could be trained for technical roles in IT and nontechnical workers could be retrained as software engineers.
"While many of our employees want to build their careers here, for others it might be a stepping stone to different aspirations," said Beth Galetti, Amazon's head of HR, in a prepared statement. "We think it's important to invest in our employees, and to help them gain new skills and create more professional options for themselves."
Amazon's initiative comes as robots and artificial intelligence are advancing and more capable of replacing human jobs.
Machines are expected to displace about 20 million manufacturing jobs across the world over the next decade, according to a recent report from Oxford Economics, a global forecasting and quantitative analysis firm. That amounts to 8.5% of the global manufacturing workforce being displaced by robots
The company is also dealing growing internal displeasure among from some fulfillment workers.
Recently, the company's plan to spend $800 million to speed up deliveries for Prime members sparked tension between the company and the leader of a major workers' union. They said the new shipping initiative could be dangers for workers and are struggling to keep up with demand.
Amazon was also criticized last April after it revealed the median pay for its global workforce, including part-timers, was $28,446 in 2017. The company said in October that it would raise its minimum wage to $15 per hour for US employees.
The loonie took a hit after the Bank of Canada struck a neutral tone and held its interest rate steady at 1.75 per cent, but recovered its momentum by late afternoon to trade above 76.5 cents to the U.S. dollar.
Mackenzie Investments chief economist and strategist Alex Bellefleur suggested the currency initially lost steam because investors may have been expecting the Bank of Canada to strike a more hawkish tone. The statement was ultimately a neutral one, but Bellefleur believes investors may have initially put more emphasis on the language surrounding trade tensions.
“The reason for the drop is perhaps the market may have been bracing for a more hawkish statement that would’ve put slightly less emphasis on trade and things like this,” he said. “If the Bank of Canada had been more forceful … I think that’s what the market was looking for.”
The BoC’s forecast for economic growth in 2020 was cut to 1.9 per cent from 2.1 per cent. And although trade tensions cloud the future, inflation is on target, the housing market is stabilizing and the central bank believes the economy appears to be returning to potential growth despite lowered projections.
The loonie has been rallying since June when U.S. Federal Reserve Chair Jerome Powell struck a dovish tone during a monetary policy update and strongly signalled an upcoming rate cut. Within days, the loonie jumped to more than 76 cents US from about 74 cents US.
On Wednesday morning, Powell once again struck a dovish tone while testifying in front of U.S. Congress.
BMO senior economist Robert Kavcic said two interest rate cuts are already being priced into U.S. markets. It does not appear the Bank of Canada will immediately follow suit, which would create an environment that some economists said may lead to the Canadian currency strengthening to 80 cents US.
A rally might put Bank of Canada Governor Stephen Poloz under pressure to make a cut quicker than expected, Kavcic said, due to concerns about exports. Poloz addressed that scenario at a press conference Wednesday, saying that a stronger dollar reduces Canada’s cost competitiveness in international markets and could slow export projections.
Current export projections are based on a valuation for the loonie of around 75 cents US, Poloz said, and there would be little impact on them if the currency trades between 74 and 78 cents US. He refused to provide a valuation for “when it begins to hurt.”
Kavcic said that number is likely around the loonie’s fair value: between 80 and 83 cents US. Still, neither he nor Bellefleur foresee the currency reaching that trading level.
Bellefleur projects that the loonie could trade around 78 cents US, while Kavcic has the loonie staying flat in 2019 and potentially reaching 77 cents US by the end of 2020.
“The Fed can go ahead and cut rates twice while the Bank of Canada sits there and you may not have a move in the Canadian dollar because the markets have already factored that in,” Kavcic said. “It could take a lot more than that to push the currency above 80 cents.”
The Bombardier Inc. job cuts in Thunder Bay will have large ramifications for a local labour market that has struggled to create jobs and opportunities over several decades.
The 550 workers affected amounts to half the work force at Bombardier’s rail-car division in the city. Put another way, that’s nearly 1 per cent of total employment in the Thunder Bay area.
“If you took the [Greater Toronto Area] labour force and laid off 1 per cent, you'd have tens of thousands of people being laid off all at once,” said Livio Di Matteo, an economics professor at Lakehead University.
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Layoffs have become a feature of life in Thunder Bay, where total employment has essentially flatlined since at least 2001. Some of the city’s major industries, such as grain transportation and forest products, have been decimated, erasing thousands of well-paid, blue-collar jobs that bolstered household wealth.
The numbers are stark. Since 2001, Thunder Bay’s employment has declined by 1 per cent, or roughly 600 workers, according to Statistics Canada. Out of 33 census metropolitan areas tracked by Statscan, Thunder Bay is the only one where employment dropped over that time period. Over all, Canadian employment climbed by 28 per cent.
Thunder Bay’s employment stagnation is part of a wider trend that’s seen provincial job growth accumulate largely in Toronto and, to a smaller extent, in Ottawa. Over the past decade, the Toronto and Ottawa areas account for greater than 70 per cent of the province’s job gains, despite having about half its population.
More broadly, Canada finds itself in a hiring boom. During the first half of 2019, close to 250,000 jobs have been added across the country, which in raw numbers is the best start to a year since 2002, and Canada’s jobless rate is close to historic lows.
But the boom hasn’t extended to Thunder Bay, where over the past year, employment has dropped by around 6 per cent. Bank of Montreal, which ranks labour-market performance at the city level on a monthly basis, currently pegs Thunder Bay last out of 33 areas.
Population growth is nonexistent, too. As of the last census in 2016, the Thunder Bay area had nearly 122,000 residents. Two decades earlier, it was close to 127,000. Prof. Di Matteo says there’s been little immigration over that span and many young people have left.
“In the end, economic opportunity fuels population growth and people go to where the jobs are,” he said.
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As private employment has lagged, the public sector has taken on greater importance and accounts for nine of the city’s 10 top employers, including school boards, postsecondary institutions and hospitals, according to city numbers from April. (Bombardier, which is the only private company on that list, also relies on public money − in the form of contracts from two provincial transit agencies, Metrolinx and the Toronto Transit Commission.)
“The public sector has become dominant in the local economy,” Prof. Di Matteo said. “And that’s been a trend in many of the rural, remote towns in Northern Ontario.”
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From a demographic perspective, Thunder Bay’s outlook is challenging. Like the rest of Canada, it will grapple with an aging population that weighs on labour-market participation.
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Earlier this year, a Statscan report said labour forces would continue expanding in most Canadian regions over the next two decades, “with the possible exceptions of Thunder Bay and Sudbury, and the non-metropolitan regions of Quebec and Atlantic Canada.”
For the combined area of Thunder Bay and Sudbury, the participation rate is projected to decline to 55.5 per cent in 2036 from 60.4 per cent in 2017.
In other words, there would be nearly one person either working or looking for employment for every person not in the labour force.
Part of the solution, Prof. Di Matteo says, is driving more immigration to Thunder Bay.
“If you have entrepreneurial immigrants come in, they often create their own jobs,” he said. “Unfortunately, in Canada right now, most of the immigration goes to the major cities.”
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July 11, 2019 at 06:04AM
Check your fridge - your kale salad could be getting recalled right now. The Canadian Food Inspection Agency (CFIA) issued a recall notice this week for Eat Smart’s Sweet Kale Vegetable Salad Bag Kit. The kale recall in Canada is due to possible Listeria contamination.
The recall applies to all areas where the salad bag is sold including Ontario, Nova Scotia, Quebec, Newfoundland and Labrador, Quebec and Prince Edward Island.
According to the CFIA, food contaminated with Listeria bacteria may not appear or smell spoiled, but it can still make you seriously ill. Symptoms include nausea, fever, vomiting, serve headache, neck stiffness, and muscle aches.
The elderly, pregnant women and people with weakened immune systems are particularly at risk. Although rare, severe cases of the illness can become fatal.
Thankfully, no illnesses have been reported as a direct result of the recall so far.
Fresh Taste Produce Ltd is cautioning customers who recently purchased the 28-ounce bag of kale salad to look for the UPC code, which is 709351891403.
They also suggest checking the best before date, which is listed as July 17, 2019, to determine whether or not their product is part of the recall.
The CFIA issued the recall after the agency conducted a sweeping food safety investigation, which could eventually lead to the recall of other products.
This isn't the first time that an Eat Smart kale salad product has been recalled in Canada recently. The brand's Sweet Kale Salad Shakeups was recalled for Listeria in December 2018. Later that same month, more Eat Smart Salad Shakeups were recalled for Listeria contamination - Asian Sesame and Tropical Lime.
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July 10, 2019 at 09:31PM
Stocks Climb on Rate-Cut Bets; Dollar Declines: Markets Wrap
(Bloomberg) -- U.S. equity futures climbed alongside stocks in Europe and Asia as investors cheered fresh signs from central bankers that rates are headed lower. Treasuries were steady, while the dollar declined.
Contracts on the main U.S. gauges gained a day after the S&P 500 briefly topped 3,000 for the first time on signals that Federal Reserve Chairman Jerome Powell is willing to lower rates, citing a slowing global economy and trade issues. The Stoxx Europe 600 Index headed for the first advance in five days, spurred by energy companies as crude rallied. Shares rose across most of Asia with the South Korean and Hong Kong markets outperforming and stocks in China edging higher.
Emerging-market stocks climbed along with currencies, while the pound continued its rebound from a two-year low. European government bonds were mixed.
This year’s rallies across stocks, bonds and credit got a fresh jolt on Wednesday thanks to comments from Fed Chairman Powell that persuaded investors rates are headed lower by at least a quarter-point in July. Minutes from the central bank’s last meeting further cemented expectations for a cut in borrowing costs. Traders will be eyeing ECB minutes and Powell’s testimony before the Senate Banking Committee on Thursday for further clues.
“There has been a total shift in monetary policy -- quantitative tightening is off the table and we’re back to some mild form of quantitative easing or stable central bank balance sheets,” said Timothy Moe, chief Asia-Pacific equity strategist at Goldman Sachs. “That’s very supportive for equities.”
Elsewhere, oil extended gains on crude output cuts ahead of a potential hurricane in the Gulf of Mexico.
Here are some key events coming up:
Powell testifies to Senate Banking Committee on Thursday.ECB minutes are due on Thursday.A key measure of U.S. inflation -- the core consumer price index, due Thursday -- is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.U.S. producer prices are due on Friday.
Here are the main moves in markets:
Stocks
Futures on the S&P 500 Index gained 0.2% as of 7:24 a.m. New York time, the highest on record.The Stoxx Europe 600 Index rose 0.2%, the first advance in a week and the biggest advance in more than a week.The Shanghai Composite Index climbed 0.1%.The MSCI Emerging Market Index gained 0.7%, the biggest rise in more than a week.
Currencies
The Bloomberg Dollar Spot Index declined 0.2%, the lowest in a week.The euro increased 0.2% to $1.1269, the strongest in a week.The British pound increased 0.4% to $1.2558, the strongest in a week on the largest climb in three weeks.The onshore yuan climbed 0.1% to 6.865 per dollar, the strongest in more than a week.The Japanese yen rose 0.3% to 108.14 per dollar, the strongest in a week.
Bonds
The yield on 10-year Treasuries decreased less than one basis point to 2.06%.The yield on two-year Treasuries declined two basis points to 1.81%, the lowest in a week.
Commodities
West Texas Intermediate crude gained 0.3% to $60.60 a barrel, reaching the highest in seven weeks on its sixth straight advance.Iron ore fell 1.4% to $113.07 per metric ton.Gold decreased less than 0.05% to $1,418.91 an ounce.
--With assistance from Ruth Carson, Chester Yung, Cormac Mullen and Gregor Stuart Hunter.
To contact the reporter on this story: Laura Curtis in London at lcurtis7@bloomberg.net
To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Yakob Peterseil
For more articles like this, please visit us at bloomberg.com
CHICAGO/WASHINGTON (Reuters) - In the wake of the U.S. housing meltdown of the late 2000s, JPMorgan Chase & Co hunted for new ways to expand its loan business beyond the troubled mortgage sector.
A dairy cow is seen grazing at the family farm, God Green Acres in Mayville, Wisconsin, U.S., June 24, 2019. Picture taken June 24, 2019. REUTERS/Darren Hauck
The nation’s largest bank found enticing new opportunities in the rural Midwest - lending to U.S. farmers who had plenty of income and collateral as prices for grain and farmland surged.
JPMorgan grew its farm-loan portfolio by 76 percent, to $1.1 billion, between 2008 and 2015, according to year-end figures, as other Wall Street players piled into the sector. Total U.S. farm debt is on track to rise to $427 billion this year, up from an inflation-adjusted $317 billion a decade earlier and approaching levels seen in the 1980s farm crisis, according to the U.S. Department of Agriculture.
But now - after years of falling farm income and an intensifying U.S.-China trade war - JPMorgan and other Wall Street banks are heading for the exits, according to a Reuters analysis of the farm-loan holdings they reported to the Federal Deposit Insurance Corporation (FDIC).
The agricultural loan portfolios of the nation’s top 30 banks fell by $3.9 billion, to $18.3 billion, between their peak in December 2015 and March 2019, the analysis showed. That’s a 17.5% decline.
Reuters identified the largest banks by their quarterly filings of loan performance metrics with the FDIC and grouped together banks owned by the same holding company. The banks were ranked by total assets in the first quarter of this year.
The retreat from agricultural lending by the nation’s biggest banks, which has not been previously reported, comes as shrinking cash flow is pushing some farmers to retire early and others to declare bankruptcy, according to farm economists, legal experts, and a review of hundreds of lawsuits filed in federal and state courts.
Sales of many U.S. farm products - including soybeans, the nation’s most valuable agricultural export - have fallen sharply since China and Mexico last year imposed tariffs in retaliation for U.S. duties on their goods. The trade-war losses further strained an agricultural economy already reeling from years over global oversupply and low commodity prices.
Chapter 12 federal court filings, a type of bankruptcy protection largely for small farmers, increased from 361 filings in 2014 to 498 in 2018, according to federal court records.
“My phone is ringing constantly. It’s all farmers,” said Minneapolis-St. Paul area bankruptcy attorney Barbara May. “Their banks are calling in the loans and cutting them off.”
Surveys show demand for farm credit continues to grow, particularly among Midwest grain and soybean producers, said regulators at the Federal Reserve Banks of Chicago, St. Louis, Minneapolis and Kansas City. U.S. farmers rely on loans to buy or refinance land and to pay for operational expenses such as equipment, seeds and pesticides.
Fewer loan options can threaten a farm’s survival, particularly in an era when farm incomes have been cut nearly in half since 2013.
Gordon Giese, a 66-year-old dairy and corn farmer in Mayville, Wisconsin, last year was forced to sell most of his cows, his farmhouse and about one-third of his land to clear his farm’s debt. Now, his wife works 16-hour shifts at a local nursing home to help pay bills.
Giese and two of his sons tried and failed to get a line of credit for the farm.
“If you have any signs of trouble, the banks don’t want to work with you,” said Giese, whose experience echoes dozens of other farmers interviewed by Reuters. “I don’t want to get out of farming, but we might be forced to.”
Michelle Bowman, a governor at the U.S. Federal Reserve, told an agricultural banking conference in March that the sharp decline in farm incomes was a “troubling echo” of the 1980s farm crisis, when falling crop and land prices, amid rising debt, lead to mass loan defaults and foreclosures.
JPMorgan Chase’s FDIC-insured units pared $245 million, or 22%, of their farm-loan holdings between the end of 2015 and March 31 of this year.
JPMorgan Chase did not dispute Reuters’ findings but said it has not “strategically reduced” its exposure to the farm sector. The bank said in a statement that it has a broader definition of agricultural lending than the FDIC. In addition to farmers, the bank includes processors, food companies and other related business.
FEDERAL BACKING FOR SMALLER BANKS
The decline in farm lending by the big banks has come despite ongoing growth in the farm-loan portfolios of the wider banking industry and in the government-sponsored Farm Credit System. But overall growth has slowed considerably, which banking experts called a sign that all lenders are growing more cautious about the sector.
The four-quarter growth rate for farm loans at all FDIC-insured banks, which supply about half of all farm credit, slowed from 6.4% in December 2015 to 3.9% in March 2019. Growth in holdings of comparable farm loans in the Farm Credit System has also slowed.
Many smaller, rural banks are more dependent on their farm lending portfolios than the national banks because they have few other options for lending in their communities. As farming towns have seen populations shrink, so have the number of businesses, said Curt Everson, president of the South Dakota Bankers Association.
“All you have are farmers and companies that work with, sell to or buy from farmers,” Everson said.
As the perils have grown, some smaller banks have turned to the federal government for protection, tapping a U.S. Department of Agriculture program that guarantees up to 95% of a loan as a way to help rural and community banks lend to higher-risk farmers.
Big Wall Street banks have steadily trimmed their farm portfolios since 2015 after boosting their lending in the sector in the wake of the financial crisis.
Capital One Financial Corp’s (COF.N) farm-loan holdings at FDIC-insured units fell 33% between the end of 2015 and March 2019. U.S. Bancorp’s (USB.N) shrunk by 25%.
Capital One Financial Corp did not respond to requests for comment. U.S. Bancorp declined to comment.
The agricultural loan holdings at BB&T Corp (BBT.N) have fallen 29% since peaking in the summer of 2016 at $1.2 billion. PNC Financial Services Group Inc (PNC.N) - which ran full-page ads in farm trade magazines promoting “access to credit” during the run-up – has cut its farm loans by 12% since 2015.
BB&T said in a statement that the decline in its agricultural lending portfolio “is largely due to aggressive terms and pricing” offered by competitors and its “conservative and disciplined” approach to risk.
PNC said its farm-loan growth is being held back by customers who are wary of taking new debt, along with increased competition from the Farm Credit System.
LOAN DEMAND STILL RISING
Lenders are avoiding mounting risks in a category that is not core to their business, said Curt Hudnutt, head of rural banking for Rabobank North America, a major farm lender and subsidiary of Dutch financial giant Rabobank Group.
In March of this year, FDIC-insured banks reported that 1.53% of their farm loans were at least 90 days past due or had stopped accruing interest because the lender has doubts it will be repaid. This so-called noncurrent rate had doubled from 0.74% at the end of 2015.
The noncurrent rates were far higher on the farm loans of some big Wall Street banks. Bank of America Corp’s noncurrent rate for farm loans at its FDIC-insured units has surged to 4.1% from 0.6% at the end of 2015. Meanwhile, the bank has cut the value of its farm-loan portfolio by about a quarter over the same period, from $3.32 billion to $2.47 billion, according to the most recent FDIC data.
Bank of America (BAC.N) declined to comment on the data or its lending decisions.
Gordon A. Giese and his son Paul Giese get ready to fill a manure tank at the family farm, God Green Acres in Mayville, Wisconsin, U.S., June 24, 2019. Picture taken June 24, 2019. REUTERS/Darren Hauck
For PNC Financial Services, the noncurrent rate was nearly 6% as of the end of March. It cut its farm-loan portfolio to $278.4 million, down from $317.3 million at the end of 2015.
David Oppedahl, senior business economist for the Federal Reserve Bank of Chicago, said the banking community is increasingly aware of how many farmers are struggling.
“They don’t want to be the ones caught holding bad loans,” he said.
Reporting by P.J. Huffstutter in Chicago and Jason Lange in Washington; Additional reporting by Elizabeth Dilts and Ayenat Mersie in New York, and Pete Schroeder in Washington; Editing by Caroline Stauffer and Brian Thevenot
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