>>> European Thursday Morning Papers Summary

Thursday Morning Papers Summary


LA REPUBBLICA
-"By making clean technology the most affordable, accessible and attractive choice, we can reduce emissions around the world," thuds said UK Prime Minister Boris Johnson said at the Glasgow COP26 climate conference. The event has yielded a clear strategy to support electric cars in every way. Electric cars are already cheaper to run than those that burn fossil fuels and they are close to reaching a tipping point when they will become cheaper to buy.

FRANKFURTER ALLGEMEINE ZEITUNG
-As the OPEC 23 member states get ready on Thursday, they will decide whether to open the tap as many western countries have asked (the US included). Oil is said to be expensive in order to reduce consumption and protect the climate. However, a high oil price not only exhausts consumers - it also stimulates new investments in higher oil production. “How do you get out of there?”
-French President Emmanuel Macron knows that Angela Merkel values ??good wine. So he invited her farewell to the idyllic small town of Beaune in Burgundy. There the outgoing Chancellor was given an honor that even Kohl was denied.

IL SOLE 24 ORE
-The Milan stock exchange FTSE MIB index has improved on the optimistic achievements of the pre-Lehman Bros collapse days. It is now at 27,300 points. A threshold that represents a 23% gain since the beginning of the year (best performance, together with Paris, among the main European indices) but symbolically it is even more relevant: it is the same level that the Italian blue chips exhibited at the beginning of September 2008, before that the crack of Lehman Brothers inflicted a blow to global stock exchanges by sinking Piazza Affari to 12,332 points (March 2009).
-US corporations, both strategic and financial, have put Italy back on their radar, targeting opportunities in infrastructure, industry and technology. The post-Covid recovery has highlighted a trend in mergers and acquisitions that has characterized the last ten years. According to KPMG, so far in 2021, the value of American acquisitions in Italy has been EUR 4.5B, while those of Italian groups in the US for EUR 1.8B.

LES ECHOS
-An important member of Societe Generale's management who is about to leave the bank. According to Les Echos insiders, the group is to announce Thursday morning, on the occasion of the publication of the third quarter results, the next departure of William Kadouch-Chassaing , the current CFO.
- Sales of all-electric cars and plug-in hybrids accounted for 18.7% of the European market in the first nine months of 2021. The Volkswagen group and its twelve brands have crushed the competition, but the Tesla Model 3 has been the single most sold all-electric vehicle in the period.

HANDELSBLATT
-The last nuclear power plant is not yet off the grid and the coal phase-out date is not yet final, while many are already calling for the end of the next energy source: If more and more activists, experts and politicians have their way, natural gas should be a thing of the past by 2035.“The goal must be a climate-neutral future, and that means the end of fossil fuels. Not just coal, but also natural gas,”says climate economist and Scientists for Future member Franziska Hoffart in an interview with Handelsblatt.

ABC
Spain has the dubious distinction of having such high employment taxes that is only ‘beaten’ by four countries. Government proposals to raise them by an additional half-point, as stated by the Minister of Social Security Jose Luis Escriva, are sounding alarm bells in Spanish companies, which have long clamored for a reduction that never comes.

>>> US Close Dow +0.29% S&P +0.65% Nasdaq +1.04% Russell +1.80%

Closing Stock Market Summary

Each of the major indices set intraday and closing record highs on Wednesday, as the market reacted positively to the Fed's taper announcement and Fed Chair Powell's press conference. The Russell 2000 was the biggest winner with a 1.8% gain, followed by the Nasdaq Composite (+1.0%), S&P 500 (+0.7%), and Dow Jones Industrial Average (+0.3%). 

Eight of the 11 S&P 500 sectors closed higher, led by the consumer discretionary (+1.8%) and materials (+1.1%) sectors with gains over 1.0%. The energy (-0.8%), utilities (-0.3%), and industrials (-0.2%) sectors closed lower. Small-caps were strong all day, and the larger stocks gained traction following the Fed's policy decision. 

As expected, the Fed left the target range for the fed funds rate near zero and said it would reduce net asset purchases by a total of $15 billion this month ($10 billion for Treasury securities and $5 billion for agency mortgage-backed securities). The central bank went one step further and said it would taper by another $15 billion in December. 

Fed Chair Powell talked down rate-hike questions with an observation that it'll still take some time to reach maximum employment (perhaps by the second half of 2022) and that inflation should be less of an issue by the second or third quarters of next year. He emphasized that policy will be adaptive to the data. 

The 2-yr yield, which is sensitive to expectations surrounding the fed funds rate, settled two basis points higher at 0.46% after hitting 0.51% during the start of Mr. Powell's press conference. The 10-yr yield settled three basis points higher at 1.58%. The U.S. Dollar Index fell 0.2% to 93.90. 

Prior to the Fed, the market was drawing support from several factors: 1) the October ISM Non-Manufacturing Index, the October ADP Employment Change report, and Factory Orders for September each exceeded expectations, 2) oil prices ($80.81/bbl, -3.05, -3.6%) continued to cool off, and 3) a lot of companies continued to beat EPS estimates. 

T-Mobile US (TMUS 121.94, +6.14, +5.3%), CVS Health (CVS 96.34, +5.19, +5.7%), and Lyft (LYFT 49.03, +3.71, +8.2%) were some of the notable earnings winners. Activision Blizzard (ATVI 66.75, -10.92, -14.1%) and Zillow Group (ZG 65.86, -19.62, -23.0%), however, were two eyesores following their earnings reports. 

Investors appeared on board with riding the market higher, with hedging interest continuing to decline. The CBOE Volatility Index (15.10, -0.93, -5.8%) closed near 15.00. 

Reviewing Wednesday's economic data:

  • The ISM Non-Manufacturing Index for October increased to a record high 66.7% (consensus 60.0%) from 61.9% in September. The dividing line between expansion and contraction is 50.0%. The October reading marks the 17th straight month of growth for the services sector.
    • The key takeaway from the report is the acknowledgment that demand shows no signs of slowing and services sector activity is running at a record pace even with the constraints of labor shortages, logistics problems, and difficulty in obtaining materials.
  • Factory orders for manufactured goods increased 0.2% m/m in September ( consensus -0.1%) following a downwardly revised 1.0% increase (from 1.2%) in August. Shipments of manufactured goods were up 0.6% after increasing 0.1% in August.
    • The key takeaway from the report is that the pace of order growth remained positive for nondefense capital goods, excluding aircraft -- a proxy for business spending -- demonstrating that manufacturing demand remained sturdy in spite of the pressures related to the Delta variant.
  • The ADP Employment Change report estimated 571,000 jobs were added to private-sector payrolls in October (consensus 370,000). The increase in September was downwardly revised to 523,000 from 568,000.
  • The IHS Markit Services PMI increased to 58.7 in the final reading for October from 58.2 in the preliminary reading and 54.9 in the final reading for September.
  • The weekly MBA Mortgage Applications Index decreased 3.3% following a 0.3% increase in the prior week.
  • Weekly crude oil inventories increased by 3.29 mln barrels after increasing by 4.27 mln barrels during the previous week.

Looking ahead, investors will receive weekly Initial and Continuing Claims, preliminary Productivity and Unit Labor Costs for the third quarter, and the Trade Balance for September on Thursday. 

  • S&P 500 +24.1% YTD
  • Nasdaq Composite +22.7% YTD
  • Russell 2000 +21.7% YTD
  • Dow Jones Industrial Average +18.1% YTD

>>> US After Hours Summary: QCOM +6.9%, BKNG +4.3%, EA +4.2% higher on earnings;

After Hours Summary: QCOM +6.9%, BKNG +4.3%, EA +4.2% higher on earnings; SPWR -8.4%, ROKU -8.1%, QRVO -7.8% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: QNST +28%, CCRN +17.6%, MLNK +11%, SUPN +9.9%, WK +9.7%, CWAN +8.9%, OCDX +8.7%, GDDY +8.5%, SITM +7.6%, FSLY +7.2%, ONEM +6.9%, QCOM +6.9%, OPRT +6.8%, GFL +6.7%, YELL +6.5%, RPD +6.4%, VAPO +5.7%, PTC +4.7%, DIOD +4.6%, BKNG +4.3%, EA +4.2%, NUS +4.1%, RYN +4.1%, ECPG +3.7%, CUTR +3.7%, PETQ +3.4%, DXC +3.3%, ICLR +3.2%, QLYS +3.1%, TXG +3.1%, INFN +3%, LUMN +3%, MGM +2.9%, TRMB +2.8%, NVST +2.7%, SRPT +2.6%, AES +2.6%, PING +2.5%, EQH +2.4%, ALB +2.3%, IIPR +2.3%, KW +2.2%, CF +2%, WLL +2%, MAXR +1.7%, ORCC +1.7%, COLD +1.7%, ACLS +1.6%, TTWO +1.5%, CORT +1.4%, HRTX +1.4%, EPR +1.3%, ADPT +1.1%, APA +1% (also increases dividend), MET +1%, IR +0.9%, MATX +0.9%, SWN +0.8%, PLYA +0.7%, HST +0.6%, MRO +0.6%, H +0.5%, ORA +0.3%, INN +0.3%, CW +0.2%, SUM +0.2%, VMEO +0.2%, AEE +0.1%, ATGE +0.1%, CTVA +0.1%, HBM +0.1%, HMN +0.1%, HR +0.1%, QTWO +0.1%, SLF +0.1%, SPXC +0.1%, CRSP +0.1%, CLI +0.1%

Companies trading higher in after hours in reaction to news: TRN +8.1% (to sell its highway products business for $375 mln), ZG +3.4% (Cathie Wood purchased shares of ZG amid stock drop, according to Reuters), OYST +1.9% (TYRVAYA Nasal Spray 0.03 mg now available at US regional wholesalers for distribution to pharmacies), WEBR +1.8% (initiates cash dividend), COLD +1.7% (CEO steps down), TTWO +1.5% (cancels Hangar 13 project, according to Bloomberg), PRFT +1% (convertible notes offering), NDAQ +0.7% (reports October metrics), FUBO +0.6% (is now live in the mobile sports betting market with launch of Fubo Sportsbook in Iowa), FIS +0.6% (announces updated capital allocation strategy; increases expected annual dividend growth rate), COST +0.3% (reports October adjusted comps +11.8%), CBOE +0.3% (reports October trading volumes), BA +0.2% (to debut 777X jet at Dubai Airshow; also FCC authorizes BA broadband satellite constellation), HII +0.1% (increases dividend), GMS +0.1% (to acquire AMES Taping Tools), FLS +0.1% (expands industrial IoT service suite, RedRaven)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: UPLD -20.1%, RMNI -15.9%, QUOT -12.7%, LCI -12.1% (also announces restructuring plan), VNDA -12.1%, MGNI -11.6%, SKLZ -10.7%, TNDM -10.2%, MDU -9%, SPWR -8.4%, ROKU -8.1%, QRVO -7.8% (also acquires United Silicon Carbide), KTOS -7.4%, MTTR -7.1%, MTW -6.2%, TPC -6.1%, OSUR -5.3%, TRUP -4.6%, REGI -4.6%, STAA -4.5%, WHD -4.2%, CDAY -4%, RGR -4%, RVLV -3.7%, INSG -3.5%, IAG -3.4%, CLR -3.3% (also to acquire Permian Basin assets from PXD for $3.25 bln), RCII -3.2%, ALL -2.9%, TTGT -2.7%, ETSY -2.3%, CAKE -2.2%, PK -2%, HUBS -1.5%, SJI -1.4%, PLMR -1.2%, ELF -1%, ET -0.9%, FSR -0.9%, PXD -0.9% (also to sell Permian Basin assets to CLR for $3.25 bln; PXD also to increase dividend), PEN -0.6%, SPOK -0.5%, FLT -0.4%, KL -0.2%, RPT -0.2%, WTS -0.2%, ACA -0.1%, LNC -0.1%, MFC -0.1%, PDCE -0.1%

Companies trading lower in after hours in reaction to news: ANIP -4% (stock offering), STAG -2.5% (stock offering), LGIH -0.6% (reports Oct home sales), PRAX -0.5% (enters into $125 mln Open Market Sale Agreement and files mixed securities shelf offering), CENX -0.4% (commences construction of new low-carbon billet casthouse), CNC -0.2% (issues statement with regard to Politan Capital Mgmt)

Challenges : Concentration des médias: Bolloré, Bouygues, Arnault et tous les Ci

Concentration des médias: Bolloré, Bouygues, Arnault et tous les Citizen Kane français auditionnés par le Sénat

Le Sénat a voté mardi la création d'une commission d'enquête sur la concentration des médias. Solennelle, la procédure impose aux personnes auditées de prêter serment et participer à l'enquête. Vincent Bolloré, Martin Bouygues, Bernard Arnault, Xavier Niel ou encore Patrick Drahi passeront sur le gril.

C’est une première en France: le Sénat va enquêter sur la concentration des médias dans le cadre d'une commission d'enquête. Si le sujet n’est pas franchement neuf, il n’a encore jamais été appréhendé de façon aussi solennelle par la Chambre haute. La création d'une commission d’enquête témoigne en effet de la volonté des élus de se saisir d’un problème significatif et relativement grave. Cette procédure est plus bien contraignante qu’une simple "mission d’information": il est impossible de se soustraire à une audition, sous peine de condamnations pénales et les personnes auditionnées doivent prêter serment. Vincent Bolloré ou Martin Bouygues –pour ne citer que les magnats de la presse les plus actifs du moment- ne pourront pas se faire porter pâles.

Composée de 21 membres, cette commission sera en place le 18 novembre pour "mettre en lumière le processus ayant permis ou pouvant aboutir à une concentration des médias en France et d’évaluer l’impact de cette concentration pour la démocratie", détaille à Challenges Patrick Kanner, président du groupe Socialiste, écologiste et républicain au Sénat. Porté par le groupe socialiste dans le cadre de son "droit de tirage", la concentration croissante des médias entre les mains de quelques oligarques a été retenue à l’unanimité comme sujet prioritaire parmi dix autres thèmes. "Les acquisitions de Vincent Bolloré sont la dernière illustration en date de cette tendance à la concentration mais arrive aussi la fusion TF1-M6. Sans parler des concentrations liées à Xavier Niel, Bernard Arnault (actionnaire minoritaire de Challenges, NDLR) et Patrick Drahi...", explique Patrick Kanner. Dans la même veine, le non-renouvellement d'Isabelle de Silva à la tête de l'Autorité de la concurrence -à un moment où l'autorité doit examiner la fusion TF1-M6- "nous interpelle", indique le sénateur.

David Assouline, rapporteur de la commission
Le principe de cette commission d’enquête a été acté à l’unanimité par la Conférence des présidents mardi 2 novembre dans la soirée. Le rapporteur est déjà choisi: il s’agit du sénateur PS de Paris David Assouline. Avec la sénatrice Sylvie Robert, ce bon connaisseur des médias –qui a été notamment l’artisan de la transposition de la directive européenne sur les droits voisins– est à l’initiative de cette commission d’enquête. "Ce sera plus solennel, plus contraignant et, j’espère, plus productif qu’une mission d’information", estime Patrick Kanner.

FT : China plans to quadruple nuclear weapons stockpile, Pentagon says

China plans to quadruple nuclear weapons stockpile, Pentagon says
Forecast of 1,000 warheads by 2030 is a sharp increase from previous estimate in ‘game-changer’ for Sino-US relations

China plans to quadruple its nuclear stockpile by 2030, according to a Pentagon assessment that points to a shift in Chinese policy with big implications for the balance of military power.

The US defence department said China could have 700 deliverable nuclear warheads by 2027 and would boost its stockpile — currently estimated in the low 200s — to at least 1,000 warheads by the end of the decade. It marked a dramatic increase from last year’s estimate when the Pentagon said China was on course to double its stockpile.

“If this was an emoji, it would be the ‘eyes popping’ emoji,” said Caitlin Talmadge, an expert on Chinese nuclear weapons at Georgetown University.

The US has 3,800 warheads with 1,800 deployed, according to the Nuclear Information Project at the Federation of American Scientists.

The Pentagon’s latest China military power report, which was released on Wednesday, said Beijing was “expanding the number of land, sea, and air-based nuclear delivery platforms and constructing the infrastructure necessary to support this major expansion of its nuclear forces”.

The warning comes weeks after the Financial Times reported China had tested a nuclear-capable hypersonic weapon that General Mark Milley, chairman of the US joint chiefs, later said was “very close” to a “Sputnik moment”, referring to the USSR launching the first artificial satellite in 1957.

The report comes as tensions remain high between the US and China, including concerns about the possibility of war over Taiwan. Military planners and experts are concerned that China is expanding its nuclear forces to limit American options in the case of conflict.

The Pentagon said the Chinese military was working towards improving certain capabilities by 2027 that would “provide Beijing with more credible military options in a Taiwan contingency”. Admiral Philip Davidson, then head of US Indo-Pacific command, in April said China could take military action against Taiwan by 2027, although other experts are more sceptical.

Speaking at the Aspen Security Forum on Wednesday, Milley said he did not think China would take military action towards Taiwan in the “near future” — meaning over the next two years — but warned that Beijing was developing the capability.

“The Chinese are clearly and unambiguously building the capability to provide those options,” he said. “But near future? Probably not. But anything can happen.”

Evan Medeiros, a former top White House Asia adviser to President Barack Obama, said the revelations in the Pentagon report signalled a “new and much more challenging type of cold war”.

“This is a historic game-changer for US-China ties, by accelerating competition and accentuating distrust,” said Medeiros. “This development demands that arms control be on the agenda when President Joe Biden and Chinese president Xi Jinping hold a virtual summit later this year.”

The Pentagon said China was boosting its capacity to produce and separate plutonium by constructing fast breeder reactors and reprocessing facilities. Talmadge said that was a “big deal” because this had been viewed as one of the constraints on China accelerating development of nuclear warheads, which require fissile material.

“The US and China are becoming more entrenched in a nuclear stalemate, a state of mutual vulnerability where neither side can protect its homeland from nuclear attack even if it strikes first,” she added.

The Chinese advancements raise new questions about whether China is moving away from its longstanding nuclear “minimum deterrence” policy, which is designed to ensure it has the capability to respond to a first strike.

Jeffrey Lewis, a non-proliferation expert at Middlebury Institute of International Studies, said it was important to maintain some scepticism about the Pentagon’s forecasts.

“I’m cautious about accepting 1,000 warheads at face value, but it seems pretty clear that the Chinese aren’t willing to accept US nuclear primacy anymore,” added Lewis.

The Pentagon said China might already boast a “nascent nuclear triad” after it developed a nuclear capable air-launched ballistic missile along with its land-based and sea-based nuclear arms. The report also confirmed that China was building hundreds of missile silos to house intercontinental ballistic missiles and was “on the cusp of a large silo-based ICBM force expansion comparable to those undertaken by other major powers”.

FT : Italian banks: bad loans are a good business for specialist investors

Italian banks: bad loans are a good business for specialist investors
Profitable work for specialists as Italy cleans up past mistakes in the banking sector

Back to business as usual. In Italy that means cleaning up past mistakes in the banking sector. This is profitable work for specialists such as Banca Ifis which deal in bad debts. It announced on Wednesday its largest deal for non-performing loans ever — and the largest in Italy this year. The group is buying unsecured consumer loans from hedge fund Cerberus valued at €3bn.

Banca Ifis started out as a specialist lender, mostly factoring company receivables. A taste for risk attracted it to buying up domestic non-performing loans. Its optimism on debt prices coincides with the country’s economic recovery. Yet plenty of buying opportunities exist within the NPL market given the woes of struggling state-controlled bank Monte dei Paschi di Siena. A government deal to sell the lender to UniCredit collapsed last month.

So far, Banca Ifis has timed its purchases well. Cash collections from its NPLs in the second quarter hit a record high of €89m. Debts under moratoria, due to government-guaranteed protection, were €233m or 70 per cent lower than last year. This latest purchase has meant that Banca Ifis has now achieved its portfolio target for this year and assets now total €25.2bn.

That compares to about €160bn of Italian loans under moratoria. These accounted for one-tenth of the total at the end of last year.

The proportion of those that will eventually be downgraded — most likely not long after the end of this year when moratoria expire — remains dependent on growth. Loans to businesses, especially small and medium-sized ones, make up the vast bulk of this cohort.

With real GDP growth of 4 per cent expected this year and next those prospects remain strong. Credit losses over that period are expected to be about 1 per cent or the same as recent years. System-wide, the ratio of NPLs might peak at 10 per cent in 2022, thinks S&P. That is about half the peak in 2015 after the European debt crisis.

Italy is better placed to deal with this than it was. Expect outliers such as MPS to spook politicians but provide opportunities for Banca Ifis, Cerberus and other investors in Italian bad loans.

FT : BMW: taking the slow road to an electrified future

BMW: taking the slow road to an electrified future
Carmaker steers different course to rivals as it bets on continuing demand for fossil fuel cars

Phasing out the internal combustion engine is one of the top goals of the climate summit. Munich-based carmaker BMW reckons the chances of a hasty death have been much exaggerated.

The company set out its philosophy alongside Wednesday’s strong third-quarter results. It argues that policymakers’ emphasis on electrification misses the big picture: the carbon footprint over a vehicle’s entire life cycle.

A lack of charging infrastructure will hobble the shift to electric vehicles, BMW says. It could have a point, symbolised by the shortage of charging points to power the fleet of electric vehicles at the Glasgow summit. Chip-fat powered generators were lined up to fill the gap.

To be sure, BMW has not ignored electric vehicles. Sales in the past nine months doubled that of the previous year — though only a quarter were purely electric. Emission-free sales will accelerate, as it starts to deliver its well-reviewed electric iX and i4 vehicles this month.

But it reckons that by 2030 half its cars sold will be petrol or diesel models. That view contrasts with that of Mercedes-owner Daimler. It plans to go all-electric by 2030, where market conditions allow. VW-owned Audi intends every new vehicle launched after 2026 to be electric.

BMW’s caution has left its share price performance lagging behind rivals. Over the past year, the market value of VW and Daimler has increased 43 per cent and 82 per cent respectively. BMW, meanwhile, has climbed just over a quarter. Its enterprise value-to-ebitda ratio is 8, almost a fifth lower than its 10-year average. That comes despite riding out the semiconductor shortage better than many peers.

Given the support of its biggest shareholder, the Quandt-Klatten family, the management can steer a different course to its rivals. If BMW is right about the pace of electrification, it will eventually benefit. But planning for continuing demand for fossil fuel cars is an unfashionable view. That is likely to continue to drag on the share price.

SCMP : China’s hypersonic missile technology, other military advances shift ‘glo

China’s hypersonic missile technology, other military advances shift ‘global geostrategic power’, says top Pentagon official
  • China’s progress in hypersonic missiles, artificial intelligence and robotics is the biggest advance since World War II technology, says Milley
  • If the US does not make a ‘fundamental change to ourselves in the coming 10 to 15 to 20 years, then we’re going to be on the wrong side of a conflict,’ he adds

China’s advances in hypersonic missile technology represents a “fundamental change” in the military balance of power that compels the US to pull off a similar leap in technological preparedness, a top Pentagon official said on Wednesday.
“We’re witnessing one of the largest shifts in global geostrategic power that the world has witnessed”, said Mark Milley, chairman of the Joint Chiefs of Staff, referring to the totality of China’s advances in nuclear capabilities, air and naval forces and its reported recent tests of hypersonic missiles. Milley was speaking at the Aspen Security Forum in Washington.

Milley added that the step change in military technology highlighted by China’s hypersonic missile prowess, artificial intelligence and robotics is the biggest since air power, mechanisation and radar were the decisive technologies that were used throughout World War II.

“If we, the United States military, don’t do a fundamental change to ourselves in the coming 10 to 15 to 20 years, then we’re going to be on the wrong side of a conflict,” he said.

The four-star general clarified comments about China’s recent hypersonic tests being “very close” to a Sputnik moment, which refers to the 1957 launching by the Soviet Union of the world’s first space satellite. China and the US have been testing hypersonic missile technologies for several years, making the comparison inaccurate, he said.

“With China, we’re going to need a full panoply of conventional forces – air, land and sea – but also space and cyber,” he said, adding that the latter two concern him the most.

Milley also dodged questions about the US government’s strategy of “strategic ambiguity” with respect to Taiwan, saying only that Washington will abide by the three joint communiqués signed by Beijing and Washington in the 1970s and early 1980s and the Taiwan Relations Act.

The former formalised Washington’s diplomatic recognition of Beijing and allowed cultural, commercial and other unofficial relations between America and Taiwan, while the latter authorises US weapons sales to Taipei.

Asked when he thought Beijing’s military might “make a move on Taiwan”, Milley said such a scenario is not likely within the next two years.
“I don’t think that [such an attack] is likely in the near future, being defined as 6, 12, maybe 24 months, that kind of window,” he said. “Having said that, though, the Chinese are clearly and unambiguously building the capability to provide those options to the national leadership if they so choose, at some point in the future.
“The US government’s policy is that whatever issues Taiwan and the People’s Republic of China have, they resolve them peacefully, in accordance with the will of the people of the island of Taiwan, and the people of China,” he added. “Were just interested in a peaceful outcome.”

WSJ : Fed Dials Back Bond Purchases, Plots End to Stimulus by June

Fed Dials Back Bond Purchases, Plots End to Stimulus by June
Central bank affirms forecast that factors driving high inflation are “expected to be transitory”

The Federal Reserve approved plans to begin scaling back its bond-buying stimulus program this month and end it by June, a major step toward withdrawing its aggressive, pandemic-driven economic support amid a recent inflation surge.

Fed officials in their postmeeting statement Wednesday said they still anticipated elevated inflation would fall because high readings are “largely reflecting factors that are expected to be transitory.”

“Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors,” the statement said.

The Fed cut its short-term benchmark rate to near zero when the coronavirus pandemic hit the U.S. economy in March 2020. It held rates at that level on Wednesday.

It also has been buying at least $120 billion a month in Treasury and mortgage securities—initially to stabilize financial markets and later to hold down longer-term interest rates. The Fed’s holdings of those securities has more than doubled since March 2020 to around $8 trillion.

The Fed will reduce its bond purchases by $15 billion per month in November and by a further $15 billion in December, the central bank said Wednesday. It said similar reductions in the pace of net purchases “will likely be appropriate each month,” though officials would be prepared to adjust that pace “if warranted by changes in the economic outlook.”

Fed Chairman Jerome Powell has so strongly signaled in advance the decision on the asset purchases that investors have shifted their focus to how he will characterize inflation risks at his news conference later Wednesday—and the implications for how soon the central bank might raise interest rates.

Fed officials don’t want to lift rates until after they have ended the bond purchases. Mr. Powell has slightly moved up plans to wind down those purchases, relative to earlier market expectations, as inflation has soared this year.

Brisk demand for goods, disrupted supply chains, temporary shortages and a rebound in travel have pushed 12-month inflation to its highest readings in decades. Core inflation, which excludes volatile food and energy prices, rose 3.6% in September from a year earlier, according to the Fed’s preferred gauge.

From April through September, the Fed’s statement described high inflation as “largely reflecting transitory factors.” Wednesday’s statement included additional language to characterize why officials still expect prices to decline. “Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation,” it said.

Since officials’ previous meeting in September, inflation data have hinted at a potential broadening in price pressures and at the prospect that prices for certain items such as used cars, which witnessed sharp gains earlier this year, have started climbing once more.

While the data don’t necessarily disprove the Fed’s earlier expectations that certain price increases tied to the reopening of the economy this year from the pandemic will fade over time, it does at least augur a longer interval of elevated inflation readings.

“Supply-side constraints have gotten worse. The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation,” Mr. Powell said last month.

Higher inflation readings and policy pivots by other similarly-situated central banks have led bond investors to anticipate that the Fed will raise rates next summer, after it stops buying bonds, and again later in the year.

Mr. Powell has been seeking a middle ground that assures investors the Fed is closely monitoring inflation risks while not appearing so worried that he leads markets to anticipate an even faster pivot to tighter money. The expectation that inflation-adjusted interest rates will remain low have buoyed global asset prices. The Fed risks triggering new economic or financial stress by shifting abruptly.