TheChek News Flow

Oct 17 (Reuters) - The Biden administration is easing export restrictions on U.S. commercial space companies to ship certain satellite and spacecraft-related items to allies and partners on Thursday, two people familiar with the matter said.

The changes are intended to make it easier for the growing U.S. commercial space industry to expand sales while also protecting national security and foreign policy interests.

U.S. space companies like Elon Musk's SpaceX, Lockheed Martin (LMT.N), opens new tab and Boeing (BA.N), opens new tab could benefit from the new rules.

Certain items involving remote sensing spacecraft or space-based logistics assembly, and servicing spacecraft will no longer need licenses for shipment to Australia, Canada, and the United Kingdom, one person said.

Some less sensitive satellite and spacecraft parts and components will no longer require licenses for shipment to over 40 countries, the person said. The countries include Canada, Australia, Japan, South Korea and most of the European Union, the second person said.

In addition, the Commerce Department will do away with license requirements for the least sensitive items like electrical connectors for most of the world, but not countries of concern like Russia and China, the people said.

The changes will be made in new rules due out from the Commerce Department on Thursday, the first person familiar with the matter said.

The rules come in response to an advanced notice of proposed rulemaking from nearly five years ago and a December 2023 National Space Council request.

After the 2019 notice came out, SpaceX urged the US to consider ways to "streamline export control regulations for US commercial space industry to lower administrative burden, decrease regulatory compliance costs and increase exports thereby bolstering the US space commercial sector and industrial base."

Kristalina Georgieva says governments’ reluctance to rein in spending heightens public finances challenge

The head of the IMF has warned of an “unforgiving” economic backdrop for government finances around the world as she highlighted a widespread reluctance among politicians to rein in spending and raise taxes.

Kristalina Georgieva, the fund’s managing director, said rising levels of borrowing meant a growing share of government revenues was being used to cover interest payments, while “lacklustre” growth heightened the challenge of curbing debts.

“Our forecasts point to an unforgiving combination of low growth and high debt — a difficult future,” said Georgieva. Countries faced “high and rising public debt — way higher than before the pandemic”, she added, even after a fall in debt-to-GDP levels as inflation lifted nominal growth.

The managing director’s remarks ahead of next week’s IMF and World Bank annual meetings come as global public debt heads to a record $100tn by the end of 2024. Borrowing surged during the early stages of the coronavirus outbreak as economies were locked down. Many governments, including those of the world’s largest economies, are yet to bring spending under control.

The US is still running substantial budget deficits, while China’s government has recently pumped funds into the economy in an effort to support weak growth.

The IMF confirmed the world’s two largest economies were driving the global rise, in findings published this week. But in prepared remarks Georgieva also highlighted a “frightening evolution” in emerging and low-income countries, as more government income is set aside to honour debt-servicing commitments.

Georgieva said governments needed to lower debt and rebuild fiscal buffers to cope with potential economic shocks — something the managing director said “will surely come, and maybe sooner than we expect”.

Separate IMF research showed that discourse from politicians “increasingly favours fiscal expansion” rather than contraction, Georgieva said, increasing the hurdles to reining in debt.

A paper covering 65 countries and drawing on more than 4,500 manifestos from 1960 to 2022 points to a proliferation of policy proposals that tend to expand government spending. 

The share of discourse pointing to a fiscal expansion has increased 40 per cent across both advanced and emerging economies over the past three decades. Political discourse focusing on fiscal “restraint” had more than halved since its 1980s peak in advanced economies, the paper said.

“Even the traditionally fiscally conservative political parties are developing a taste for borrow-to-spend,” Georgieva said.

The US presidential election next month has been characterised by campaign pledges that point to increasing largesse on both sides of the political spectrum. The national debt stands at 99 per cent of GDP and, according to the Congressional Budget Office, is poised to surpass historical records and hit 125 per cent 10 years from now, if there are no changes to current laws. 

The Committee for a Responsible Federal Budget, a non-partisan group, found this month that if Donald Trump wins the election the debt-to-GDP ratio would rise 17 percentage points to 142 per cent of output by the middle of the next decade. The Republican nominee’s pledges to lower taxes for individuals and businesses, alongside plans to impose hefty tariffs and deport millions of immigrants, lay behind the rise.

Under Kamala Harris, the Democratic challenger, that ratio would also increase, albeit by a lesser 8 percentage points to 133 per cent of GDP in 10 years. 

In her speech, Georgieva said there had been some good news, most notably the global retreat of inflation, which had not been accompanied by a recession. Both the US and euro area labour markets are “cooling in an orderly manner”. 

However, the once-in-a-generation inflationary shock a few years ago would have enduring effects on household incomes, Georgieva warned. This is on top of continued geopolitical tensions, including the worsening conflict in the Middle East. 

Growth, meanwhile, is set to be lacklustre, according to the IMF, which in July predicted a global expansion of 3.2 per cent in 2024 and 3.3 per cent in 2025.  

“Budgets need to be consolidated — credibly, yet gradually in most countries,” said Georgieva. “This will involve difficult choices on how to raise revenues and make spending more efficient, while also making sure that policy actions are well explained to earn the trust of the people.”

Overall exports in September fell 12.4 percent in value and over 20 percent in volume, with China and Hong Kong’s high double-digit slumps accounting for two-thirds of the decline.

PARIS – The summer glow didn’t last long for Swiss watches.

Exports in September contracted sharply, slumping 12.4 percent in value and 20.8 percent in volume, according to figures released by the Federation of the Swiss Watch Industry on Tuesday.

The industry organization said it was “the most marked of the year” to date, with a total value just hovering above the 2 billion Swiss francs mark.

Monthly export tallies had seen a slight improvement in July and August, although the FHS had expressed a negative outlook for the rest of the year.

For the first nine months of 2024, the Swiss watchmaking sector saw exports decline by 2.7 percent.

September exports to China and Hong Kong, which have now gone down to fifth and fourth place respectively in market ranking by size, fell 49.7 percent and 34.6 percent year-on-year.

This is a further sign of the marked deterioration of the Greater Chinese market, where growth is flagging due to factors including high youth unemployment and an ongoing real estate market slump.

These poor results accounted for two-thirds of the month’s decline, according to the FHS. The decline of these two markets, plus the 10.7 percent and 13.9 percent drops recorded for exports headed respectively to the U.K. and Singapore, made up 80 percent of the global decline.

The global picture was dim, with Asia coming off the worst with a 22.6 percent decline for the region. Europe, where Germany and Spain grew over 5 percent each, was deemed “less concerning” by the industry body despite its 3.4 percent slump.

One bright spot was the U.S., which grew a modest 2.4 percent but consolidated its position as the leading market for Swiss timepieces. Japan, now in second place, rose by only 2 percent that contrasted with its summer boom.

This reflected the combination of a stronger yen and reduced regional price gaps, according to Citi anaylist Thomas Chauvet.

All material categories were impacted by the downturn in exports last month in unit numbers and value, with steel watches continuing their downward trend. Volumes decreased by high double-digit percentages across all categories.

All price ranges were affected, with a bell-shaped curve that saw the mid-price range between 500 and 3,000 Swiss francs contract by a third. Luxury watches, at 3,000 Swiss francs and above at export price, declined 10.9 percent and 7.3 percent in volume and value respectively.

Calling the higher price point “relatively resilient,” Bernstein’s Luca Solca said in a research note that there was “potential for gradual recovery, given the intent of the Chinese government to improve the economy” with stimulus packages despite short-term demand woes affecting the whole luxury industry.

Although the better performance of the high-end watches could be due to higher product availability from brands like Rolex, “this may lead to broader luxury watch resilience than expected,” Solca noted.

Chauvet further pointed out that the Swiss watch export figures of the past three months were “rather inconsistent with negative sell-out trends,” in a research note, as luxury groups start to report third-quarter earnings.

On Tuesday, LVMH Moët Hennessy Louis Vuitton reported a 4 percent decrease in organic sales for its watches and jewelry division in the third quarter of 2024, while the consensus estimate expects an 8 percent slump for Compagnie Financière Richemont’s specialist watchmakers ahead of its Nov. 8 interim results and a 5 percent decline from the Swatch Group.

Canadian company’s executives are in Tokyo to try to move buyout offer forward

Alimentation Couche-Tard’s proposed $47bn buyout of Seven & i is a better deal and less risky than its target’s break-up plan, the Canadian retailer’s chief said in Tokyo as he urged the Japanese group to start talks.

Couche-Tard executives said on a trip to Japan that they wanted more information on Seven & i’s business and the chance to discuss their bid with government officials who would have to review any deal.

Their visit comes after the Canadian company increased its offer for the 7-Eleven owner by 20 per cent and follows an announcement from the Japanese group that it planned to split its convenience store operations from non-core businesses, a move investors and analysts said was an attempt to fend off the bid.

“We think [our offer is] more compelling than what was proposed last week, with a great deal more certainty and much less risk,” said Alex Miller, the recently appointed chief executive and president of Couche-Tard.

“Our offer is a certainty, right, it’s cash, versus a hope that [Seven & i] can continue to execute on a plan that’s not delivered value over the last years,” added Brian Hannasch, the company’s former chief executive and now special adviser to the group.

The comments were made during a joint interview in Tokyo that included Couche-Tard’s chief financial officer and its billionaire founder, Alain Bouchard, who has been targeting Seven & i for roughly 20 years. Couche-Tard made an offer for the group in 2020 before the Covid-19 pandemic derailed the plan.

The Canadian company launched a $39bn bid for the Japanese group that was made public in August. Seven & i rejected the offer, saying it “grossly” undervalued the business and did not account for the difficulty of getting a deal past US competition regulators.

Miller on Thursday said the group was confident of being able to handle US antitrust scrutiny. “We . . . are prepared to make significant divestments as part of this transaction,” he said. “Our goal is to engage in these substantive discussions.”

However, Bouchard said Seven & i, the Japanese group’s founding Ito family and government officials had so far refused a meeting. “We’re here . . . because of our compelling offer we have made to Seven & i. And we hope to be able to have access to the internal information that we need to look at,” said Bouchard.

Couche-Tard believes the government will eventually engage in talks once Japan’s ongoing parliamentary election campaign is over.

One person familiar with the situation said that while a meeting had yet to be agreed, the two companies had been discussing the terms under which one might take place.

Couche-Tard recently sent Seven & i a new potential acquisition price of close to $47bn. The bid, which if completed would be the biggest foreign takeover of a Japanese company, is being considered by a special Seven & i committee.

“We are interested in the entirety of Seven & i, absolutely, including Japan,” confirmed Miller, adding that they would keep local operations intact.

The group’s chief financial officer, Filipe Da Silva, added that financing the deal would not be an issue and that it was holding talks with Japanese financial institutions and partners who could help fund the deal while allowing its investment-grade credit rating to be maintained.

Seven & i’s stock price has risen more than 30 per cent since the first Couche-Tard offer in August. But at ¥2,218 ($15) a share, it is still below the Canadian company’s latest bid of closer to $18.

Some investors are putting pressure on Seven & i to review the offer. US-based Artisan Partners told the Japanese group’s board in a letter this week that Couche-Tard’s offer was “clearly superior to the speculative value that could potentially be achieved by implementing the restructuring plan”.