NYT : Japan Prepares for Possible Hit by Super Typhoon Hagibis

Japan Prepares for Possible Hit by Super Typhoon Hagibis
The center of the storm was in the Pacific Ocean, and could hit Tokyo this weekend.


A super typhoon in the Pacific Ocean could hit Japan on Saturday, potentially causing grave damage in Tokyo, experts said.

The center of Super Typhoon Hagibis was roughly 950 miles south of Tokyo as of Thursday morning local time, according to Brandon Bukunt, a meteorologist with the National Weather Service in Tiyan, Guam.

The storm was moving about nine miles per hour to the north, and expected to pass along the east coast of Japan on Saturday evening, he said. The fastest sustained winds of the storm, as estimated by satellites, were 160 miles per hour, equivalent to a Category 5 hurricane; a storm with sustained winds of over 150 miles per hour is classified as a super typhoon.

The storm is expected to weaken, with winds at about 90 miles per hour, as it approaches Japan. Mr. Bukunt predicted heavy rain there starting late Friday or early Saturday. The storm, he said, is expected to undergo “an extra-tropical transition” in the following days and become a large storm in the Bering Sea.

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“It will impact the West Coast of even the U.S. with large surf, and Hawaii as well,” he said.

NHK, Japan’s public broadcaster, reported that officials were urging residents to prepare for potentially severe weather, including dangerous storm surges.

The typhoon caused the cancellation of Rugby World Cup games in Japan between England and France and Italy and New Zealand, the first time games have been canceled at the tournament. The canceled games will be counted as scoreless draws, with each team earning two points in pool standings.

It was unclear if Sunday’s match between Japan and Scotland in Yokohama — to determine who gets into the quarterfinals — would be affected.

Jeff Masters, a meteorologist with the magazine Scientific American, said that if Hagibis proceeds as predicted, it could become one of the most damaging typhoons in Japanese history.

“If it hits Tokyo Bay like some of the current forecasts are saying, then it’s going to be a multibillion dollar disaster,” Dr. Masters said.

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Japan Rail announced that it would likely suspend services on multiple lines in advance of the typhoon hitting Japan. Both Japan Airlines and All Nippon Airways have said they will suspend flights from Friday to Sunday.

It has been a month since Typhoon Faxai hit Japan, and some homes in Chiba prefecture outside Tokyo are still without power and many homes damaged during that storm are still huddling under blue tarps.

Last year, Jebi, the worst typhoon in 25 years, killed 11 people, injured hundreds, and caused an estimated $12.6 billion in damage. It prompted government evacuation orders for about 49,000 people, with many more advised to flee.

A super typhoon in the Pacific Ocean could hit Japan on Saturday, potentially causing grave damage in Tokyo, experts said.

The center of Super Typhoon Hagibis was roughly 950 miles south of Tokyo as of Thursday morning local time, according to Brandon Bukunt, a meteorologist with the National Weather Service in Tiyan, Guam.

The storm was moving about nine miles per hour to the north, and expected to pass along the east coast of Japan on Saturday evening, he said. The fastest sustained winds of the storm, as estimated by satellites, were 160 miles per hour, equivalent to a Category 5 hurricane; a storm with sustained winds of over 150 miles per hour is classified as a super typhoon.

The storm is expected to weaken, with winds at about 90 miles per hour, as it approaches Japan. Mr. Bukunt predicted heavy rain there starting late Friday or early Saturday. The storm, he said, is expected to undergo “an extra-tropical transition” in the following days and become a large storm in the Bering Sea.

“It will impact the West Coast of even the U.S. with large surf, and Hawaii as well,” he said.

NHK, Japan’s public broadcaster, reported that officials were urging residents to prepare for potentially severe weather, including dangerous storm surges.

The typhoon caused the cancellation of Rugby World Cup games in Japan between England and France and Italy and New Zealand, the first time games have been canceled at the tournament. The canceled games will be counted as scoreless draws, with each team earning two points in pool standings.

It was unclear if Sunday’s match between Japan and Scotland in Yokohama — to determine who gets into the quarterfinals — would be affected.

Jeff Masters, a meteorologist with the magazine Scientific American, said that if Hagibis proceeds as predicted, it could become one of the most damaging typhoons in Japanese history.

“If it hits Tokyo Bay like some of the current forecasts are saying, then it’s going to be a multibillion dollar disaster,” Dr. Masters said.

Japan Rail announced that it would likely suspend services on multiple lines in advance of the typhoon hitting Japan. Both Japan Airlines and All Nippon Airways have said they will suspend flights from Friday to Sunday.

It has been a month since Typhoon Faxai hit Japan, and some homes in Chiba prefecture outside Tokyo are still without power and many homes damaged during that storm are still huddling under blue tarps.

Last year, Jebi, the worst typhoon in 25 years, killed 11 people, injured hundreds, and caused an estimated $12.6 billion in damage. It prompted government evacuation orders for about 49,000 people, with many more advised to flee.

NYT : Tech Giants Shift Profits to Avoid Taxes. There’s a Plan to Stop Them.

Tech Giants Shift Profits to Avoid Taxes. There’s a Plan to Stop Them.

Digital tax dodgers, take heed: International leaders have advanced a plan to prevent large multinational companies like Apple, Facebook and Amazon from avoiding taxes by shifting profits between countries.

It’s an effort to de-escalate a global battle over how to tax the digital economy.

The framework proposal, released Wednesday by the Organization for Economic Cooperation and Development, would allow countries to tax large multinationals even if they did not operate inside their borders. If international negotiators can now reach agreement on its key details, the plan will pave the way for new taxes not just on tech companies but on automakers and any other large multinational firms that operate online.

Political and corporate leaders have clashed in recent years over how — and where — to tax companies that operate across national borders, particularly those that sell goods and services online.

Traditionally, companies have paid taxes in the countries where their economic activity is generated. But in the digital economy, firms can “move” the source of their profits, like patents and other intellectual property, to countries where tax rates are extremely low. That allows them to pay lower rates than companies that operate only in a single country like the United States.

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Many countries, particularly those in Europe, have moved to curb that practice by approving new taxes on large multinational companies that sell to their citizens but pay little or no tax to their countries. France approved a new digital tax this year that would hit large American tech companies like Google. The Trump administration responded by threatening tariffs on imported French goods, like wine, before the countries agreed to pause their plans in hopes of finding a multilateral agreement through the Organization for Economic Cooperation and Development.

Wednesday’s release brought an 18-page framework plan that officials hope will form the basis of an international agreement on digital taxation as early as next year. That framework would fundamentally alter how and where companies that operated across national borders were taxed, though it leaves the details of those tax rates to future negotiators. It suggests new rules on where companies should pay taxes — largely based on where their sales occur — and on which profits are subject to taxation.

“In a digital age, the allocation of taxing rights can no longer be exclusively circumscribed by reference to physical presence,” the framework states. “The current rules dating back to the 1920s are no longer sufficient to ensure a fair allocation of taxing rights in an increasingly globalized world.”

The framework applies only to multinationals with annual revenues of about $825 million or higher. It excludes manufacturing suppliers and resource extraction companies, like oil companies.

As it stands, the framework appears to be a victory for large, consumption-heavy countries like the United States, China and much of Western Europe, and a loss for so-called tax havens, like Ireland. Advancing the negotiating process is a win for large multinationals, even though a final deal could put them on the hook to pay more in taxes, because the alternative appears to be a series of country-by-country digital taxes that could be expensive to comply with.

“Amazon welcomes the publication of these proposals by the O.E.C.D., which are an important step forward,” a spokeswoman said Wednesday in an email. “Reaching broad international agreement on changes to fundamental international tax principles is critical to limit the risk of double taxation and distortive unilateral measures and to provide an environment that fosters growth in global trade, which is vital for the millions of customers and sellers that Amazon supports around the globe.”

A Treasury Department spokesman said on Wednesday that the United States “is studying the O.E.C.D. Secretariat’s proposal and is actively engaged in the process aimed at forging a consensus on international tax issues,” before reiterating the administration’s opposition “to unilateral digital services taxes.”

The framework will be taken up for discussion by finance ministers from large countries, who are due to meet in Washington next week.

>>> Futures Crash After US-China Make "No Progress" On Trade Talks; China Delega

Futures Crash After US-China Make "No Progress" On Trade Talks; China Delegation To Depart One Day Early: SCMP

And to think how blissfully stocks surged today on optimism that China was willing to pursue a partial deal...
Moments after US equity futures reopened for trading, they plunged after the SCMP reported that deputy-level trade talks between the US and China aimed at laying the groundwork for high-level negotiations later this week "failed to yield any progress on critical issues, according to two sources with knowledge of the meetings."
According to the report, the deputy-level negotiators, led on the Chinese side by vice-minister for finance Liao Min, spent the time focusing on only two areas: agricultural purchases and intellectual property protection. This apparently was not enough.

As other newswire reported earlier, during the discussions on Monday and Tuesday in Washington, the Chinese refused to talk about forced technology transfers, one source said, which is a core US grievance regarding China’s economic policies.
Speaking on condition of anonymity, the person said that talks had also skirted the issue of state subsidies, which the Trump administration says give Chinese companies an unfair advantage over international competitors.
“They have made no progress,” said another source familiar with the talks, adding that the Chinese side had not made headway in persuading US negotiators to consider a freeze on tariff increases, a main priority for Beijing.
And confirming that the week's entire negotiation was a fiasco from the start, the SCMP reports that the Chinese delegation is planning to leave Washington on Thursday - one day early - and after just one day of principal-level talks, the SCMP source noted. Beijing’s negotiating team, headed by Vice-Premier Liu He, had previously planned to leave Washington late on Friday, allowing for up to two full days of talks.
Liu arrived in the US capital on Tuesday afternoon amid one of the tensest weeks for bilateral relations since the trade war began in July 2018.
It appears that this week's NBA fiasco may have been the straw that broke the camel's back:
Fallout from an NBA team general manager’s message of support for Hong Kong protesters has roiled public opinion on both sides. And earlier this week Washington announced sanctions against Chinese government entities, officials and companies it considers implicated in Beijing’s policies targeting largely Muslim ethnic minority groups in the Xinjiang Uygur autonomous region.
The Chinese government shot back, calling for an immediate reversal in the administration’s actions.
To be sure, Wednesday's announcement that the US would block visa of various Chinese officials did not help.
In any case, with any hopes of even a modest, or mini, trade deal now seemingly collapsed, so have futures, which are puking after hours...
... as is the Yuan.

If confirmed, expect much more pain for a market which some have said has priced in the US-China trade deal no less than three times already.

>>> US After Hours Summary: BBBY +22% on new CEO appointment, PCG plummets on ba

After Hours Summary: BBBY +22% on new CEO appointment, PCG plummets on bankruptcy judge decision

After Hours Gainers:

Companies trading higher in after hours in reaction to sales update: COST +0.4% (reports Sept total comps +4.2%, e-commerce comps +17.8%)

Companies trading higher in after hours in reaction to news: BBBY +22.2% (appoints Mark Tritton as President and Chief Executive Officer), S +2.1% (edges higher after Mississippi Attorney General confirms resolution reached for T-Mobile US [TMUS] merger), PUMP +1.9% (announces substantial completion of fact finding for its previously disclosed internal review; also announces CFO transition and Executive Chairman appointment and provides operational update)

After Hours Losers:

Companies trading lower in after hours in reaction to news: PCG -28.1% (lower on reports that Judge will allow for consideration of alternative restructuring plans), VKTX -2% (continued weakness), SPLK -0.9% (files for 2,648,372 share common stock shelf offering by holders and separately files for ~177K share common stock offering by selling stockholders pursuant to Cloud Native Labs agreement), TGT -0.5% (appoints Michael Fiddelke as CFO, effective November 1)

WSJ : American Delays 737 MAX’s Return, Grounding Costs Mount

American Delays 737 MAX’s Return, Grounding Costs Mount
Carriers grapple with capacity crunch as Boeing prepares fixes to aircraft’s systems

American Airlines Group Inc. AAL 3.07% said it expects Boeing Co. BA 0.23% ’s 737 MAX will remain out of service until January, the latest example of how the grounded plane continues to create additional costs and logistical burdens for carriers and passengers.

The global fleet of MAX jets was projected to be near 1,000 by the end of this year, based on Boeing’s production plans, before it was grounded in March following two fatal crashes.

Now carriers that fly the MAX are paying millions of dollars to maintain grounded planes and adjust their operations as the suspension continues. Analysts estimate some three million passengers will have experienced some disruption to their travels if the fleet remains grounded through year’s end.

American said Wednesday that it expects to have the MAX back in service on Jan. 16, more than a month beyond its previous projection. United Airlines Holdings Inc. UAL 2.09% still has the MAX on its schedule from December.

Some carriers are removing the aircraft from bookings next summer in case the global MAX fleet remains depleted. Industry leaders including Ryanair Holdings PLC Chief Executive Officer Michael O’Leary have said the move would likely result in higher fares during that peak period.

Airlines have filled around half the lost capacity by renting planes and deferring the retirement of older aircraft. The remaining capacity crunch helped push the percentage of seats filled on flights world-wide to all-time highs in July and August, according to the International Air Transport Association. More passengers are being turned away from overbooked aircraft.

Carriers are paying to rebook passengers and pay idle flight crews while they lose profits from canceled flights. Some analysts estimated the daily costs associated with each grounded MAX ran as high as $150,000 for some carriers, which included renting replacement jets, finance costs on grounded planes, crew expenses and accommodations made to passengers.

The grounding of the MAX has coincided with other operational problems for big carriers, such as a dispute with mechanics that American said has forced the cancellation of hundreds of flights. Southwest Airlines Co. said the lack of planes helped hasten its decision to stop operations at Newark Liberty International Airport, where it had struggled to make money.

Some of the capacity crunch from the MAX’s grounding is being offset by the first tempering of passenger and cargo demand in years. Passenger traffic rose 3.6% in July from a year earlier, half its average pace over the past two years, as cooling economic growth and trade tensions weighed on the industry. Had demand growth kept pace with past years, some analysts said, fares likely would have climbed higher.

Boeing has set aside an initial $5.6 billion to compensate customers for grounded and undelivered jets. The aerospace giant has said it expects the MAX to be approved by regulators to fly again in the fourth quarter, if it secures regulatory clearance in the next several weeks.

Disagreements between U.S. and European air-safety regulators over portions of proposed fixes to the MAX’s flight-control systems could result in more delays before the plane is cleared to fly, The Wall Street Journal reported Tuesday.

Vasu Raja, American’s vice president of network and schedule planning, said the grounding has been one of the most complex scheduling problems of the past two decades. American had 24 of the jets in March and had expected 16 more to arrive by year-end.

The airline has adjusted its schedule more than half a dozen times since the MAX was grounded in March. The carrier has added staff at customer service centers to handle calls from passengers checking to see whether their flights have been affected.

American said it would work to minimize the impact on travelers over the holidays.

Some travelers have already had trips upended by the MAX’s absence.

Frank Muto booked his family’s late October trip to Disney World last spring. In July, Southwest sent an email telling him that the family’s return flight had been canceled, and that the only other nonstop option departed six hours earlier than they had planned. That meant his family would miss most of their last day at the resort, which they had already paid for. He said customer service agents told him the change was because of the MAX grounding.

“Boeing gave them an inferior product, and who’s hurting? All the customers,” Mr. Muto said. He canceled his return flight and booked one-way tickets on an American flight back home to Philadelphia.

A Southwest spokesman said the airline has tried to find acceptable alternatives for as many passengers as possible as it has trimmed its schedule to reflect its reduced fleet.

Some U.S. MAX operators have rejiggered flights rather than hire replacement planes, contributing to a rise in denied boardings. The level of denied boardings climbed more than 15-fold at American in the second quarter from a year earlier, with the carrier hobbled by the grounding as well as the dispute with its mechanics. The metric more than doubled at Southwest, the largest MAX operator, citing the grounding.

American said Wednesday that the grounding canceled 9,475 flights in the third quarter and sliced $140 million from pretax profits. Southwest had said there would be a $175 million impact in its second quarter. Both have said their costs would climb as the delivery date for dozens of more jets they have ordered is pushed back.

Icelandair Group Hf in September said it reached a deal with Boeing to cover “a fraction” of what it said amounted to $140 million in costs so far for grounding its six MAX jets and delays to the delivery of another 10. South Africa’s Comair Ltd. said the grounding of its single MAX cost it $13 million through September.

Southwest, like other carriers, is talking with Boeing about a possible settlement to cover costs from the grounding.

The airline’s pilots have said the grounding has cost them money because of fewer flying opportunities. Their union has sued Boeing, seeking compensation of more than $100 million. Southwest CEO Gary Kelly told employees last month that the airline is looking to share the proceeds of any deal.

WWD : LVMH Shrugs Off Hong Kong Woes With 17% Q3 Sales Rise Organic sales were u

LVMH Shrugs Off Hong Kong Woes With 17% Q3 Sales Rise
Organic sales were up 19 percent in the key fashion and leather goods division, which includes Louis Vuitton and Dior.

PARIS — LVMH Moët Hennessy Louis Vuitton said sales rose 17 percent in the third quarter, fueled by rapid growth in fashion and leather goods, despite the sharp drop in tourism in Hong Kong as a consequence of nearly four months of violent anti-government protests.

Sales totaled 13.32 billion euros in the three months ended Sept. 30, up 11 percent on an organic basis, the company said. Analysts had banked on a 9 percent rise in like-for-like revenues.

Tourist arrivals in Hong Kong fell nearly 40 percent in August versus the same period last year, following a 5 percent drop in July, representing the biggest monthly decline since the SARS outbreak in 2003. Retail sales plummeted by a record 23 percent in August, according to the most recent government data.

LVMH’s performance was driven by its key fashion and leather goods division, which includes Louis Vuitton, Dior and Fendi. It saw revenues rise by 19 percent on a like-for-like basis to 5.45 billion euros during the third quarter, again sharply exceeding consensus estimates.

The division had posted organic growth of 14 percent in the same period a year ago, and recorded a 20 percent rise in like-for-like sales in the second quarter.

Wines and spirits were up 8 percent, while perfumes and cosmetics recorded organic growth of 7 percent. Selective retailing, which includes duty-free operator DFS and beauty retailer Sephora grew 4 percent, and watches and jewelry posted a 5 percent increase.

“DFS continued to grow over the first nine months of the year despite the slowdown in Hong Kong,” LVMH said in a statement issued after the market close.

The industry bellwether’s quarterly sales figures come before luxury rivals Kering and Hermès International, both due to report on Oct. 24. Compagnie Financière Richemont is scheduled to publish interim results on Nov. 8.

The unrest in Hong Kong could have a negative impact of between 0.6 and 1.2 percent on global luxury growth this year, if the fourth quarter is as badly hit as August and September, Bernstein said in a recent research report.

It estimated Hong Kong accounts for 5 to 10 percent of global luxury sales — in the higher end of the range for hard luxury, and in the lower end for soft luxury. Bernstein said it assumed the sales decline in the third quarter was 50 percent in Hong Kong, and that there would be no improvement in the fourth quarter.

Analysts estimate that Hong Kong accounts for around 6 percent of LVMH’s overall sales, and some of those purchases will have been transferred to other parts of Asia.

“We expect that more than half of the sales decline in Hong Kong to be offset by repatriation of purchases to [Mainland China] and dynamic trading in other Asian markets like Korea and Japan,” Rogerio Fujimori, analyst at RBC Capital Markets, said in a recent report.

He sees no end in sight to the political turmoil in Hong Kong, concluding that tourism from Mainland China should remain very weak for the next six to nine months. “We believe that most brands could suffer sales declines in Hong Kong to the tune of minus 30 percent to minus 60 percent in Q3,” he wrote.

Edouard Aubin, analyst at Morgan Stanley, said DFS is particularly exposed, with an estimated 45 percent of its sales coming from Hong Kong and Macao. Bulgari also risks taking a hit, with Aubin estimating that Chinese nationals account for 55 percent of the Italian jeweler’s sales.

LVMH is due to provide further details Thursday in a conference call with chief financial officer Jean-Jacques Guiony. The luxury group’s share price is up around 41 percent so far this year. LVMH chairman and chief executive officer Bernard Arnault is listed as the world’s third richest man in the Bloomberg Billionaires Index, with a net worth of $90.8 billion.

FT : Fed worried about rising economic risks from trade war

Fed worried about rising economic risks from trade war
Central bank board conflicted over impact on employment and consumer spending

Federal Reserve economists have warned about the rising downside risk to the economy in the year ahead, according to the minutes of its September policy meeting at which it cut interest rates for the second time this year.

The minutes, released on Wednesday afternoon, showed the US central bank’s statistical models on the likelihood of a recession in the medium term had increased due to risks associated with the trade war and geopolitics.

In the policy statement accompanying its September rate decision, the Fed noted the improved health of the consumer, with household spending rising at a “strong pace”, but pointed out business fixed investment and exports had “weakened” since its July meeting, when it delivered the first rate cut since the financial crisis.

“Participants generally judged that downside risks to the outlook for economic activity had increased somewhat since their July meeting, particularly those stemming from trade policy uncertainty and conditions abroad,” the minutes said.

“In addition, although readings on the labour market and the overall economy continued to be strong, a clearer picture of protracted weakness in investment spending, manufacturing production, and exports had emerged.”

James Bullard, president of the St Louis Fed, broke from the ranks of other dovish policy-setting members last month by voting for a steeper rate cut of 50 basis points. Esther George of the Kansas City Fed and Eric Rosengren of the Boston Fed voted in September, as well as July, to keep the target range unchanged.

Wall Street shrugged off the release, with the S&P 500 holding on to its gains of nearly 1 per cent. US Treasuries saw a muted reaction as well, with the yield on the policy-sensitive two-year Treasury bill up 3.1 basis points to 1.47 per cent, and the yield on the benchmark 10-year note fell less than a basis point to 1.58.

Market expectations for the future path of monetary policy have gyrated wildly in recent weeks, with the implied probability of a quarter-point cut at this month’s meeting rising dramatically from the 40 per cent probability seen at the end of the month, according to futures prices compiled by Bloomberg.

Expectations barely budged following the release of the meeting, with the odds of a third cut since the financial crisis elevated at 78 per cent. Should Mr Powell move ahead with a quarter-point reduction in the Fed’s benchmark policy rate, investors are pricing in two more cuts before the end of next year.

A few FOMC participants expressed concerns about the financial markets expectations about the federal funds rate. They suggested the Fed should use its post-meeting statement “to provide more clarity about when the recalibration of the level of the policy rate in response to trade uncertainty would likely come to an end.”

Noelle Corum, a portfolio manager at Invesco, said the recent spate of economic data and growing uncertainty between the US and China over trade policy pointed to a cut at the end of the month as well as another in December. Still, the Fed is challenged not only in how it communicates these risks, but also navigates the many divisions among its own officials.

“The Fed is threading the needle between the positive growth picture in the US and the need to cut rates,” she said. “While a divided Fed makes it interesting . . . at the end of the day they can’t ignore the data”, which Ms Corum said points to a weakening consumer.

The Fed continued a discussion in September of its policy framework, or its set of tools for carrying out its goals of stable prices and full employment. The discussion shows broad concern that the Fed’s policy rate, currently at 1.75 to 2 per cent, will probably drop back to zero and “bind”, or stay there, during the next recession, forcing policymakers to turn to other tools.

Some members worried that low inflation in Europe and Japan was a risk for the United States as well. “These participants pointed to long, ongoing [zero or low policy rate] spells in other major foreign economies,” the minutes recorded, “and suggested that, to avoid similar circumstances in the United States, it was important to be aggressive when confronted with forces holding inflation below zero.”

The Fed also discussed using a “make-up” strategy, in which policymakers promise to make up for past inflation shortfalls with a commitment to higher inflation during a downturn. This strategy, Fed staff warned, required clear communication.

In debating the current economic outlook, policymakers were concerned about the proximity to zero rates. A few members of the group worried about trade uncertainty argued that easing sooner would prevent the Fed from having to leave interest rates lower for longer. But the group arguing to wait to drop the Fed’s policy rate made a parallel argument.

“A couple of participants suggested that, if it decided to provide more policy accommodation at the present juncture the committee might be taking out too much insurance against possible future shocks, leaving monetary policy with less scope to boost aggregate demand in the event that such shocks materialised.”