US growth in the July-September quarter was slightly slower than previously reported, dragged down by the large drop in exports amid President Donald Trump’s multi-front trade wars.

With hundreds of billions of goods hit by retaliatory tariffs, US exports fell by the largest amount since early 2009 at the height of the global financial crisis.

Gross domestic product expanded by 3.4 percent in the third quarter rather than the 3.5 percent previously reported, due in large measure to the 4.9 percent drop in exports, five-tenths more than the Commerce Department originally estimated.

Goods exports dropped 8.1 percent, the biggest decline since the first three months of 2015.

Trump’s aggressive trade policies, and especially the tariff retaliation from China, has impeded exports, with soybean sales nearly grinding to a halt. The strong US dollar also has made American goods more expensive.

The smaller rise in consumer spending, largely the result of lower fuel costs, also contributed to the downward revision to GDP growth, the Commerce Department said.

Meanwhile, residential investment fell 3.6 percent, only partly offset by 1.1 percent gain in non-residential, or business, investment, data borne out by the slowdown in home construction and sales.

Other data show fourth quarter growth is shaping up to be even more sluggish. Purchases of durable goods — big ticket items like appliances, vehicles and machinery — rose in November compared to October, but much less than expected.

Orders were up 0.8 percent last month, less than half the increase economists had forecast, according to a separate Commerce Department report. That follows a big drop in October, and will drag on GDP in the final quarter of 2018.

Excluding transportation goods, durable goods orders fell 0.3 percent compared to October, and when defense is removed, the drop was 0.1 percent.

Orders are still 8.4 percent higher than they were through November 2017, but have been on a declining trend for three months.
…

It was another miserable day on Wall Street as a series of big December plunges continued, putting stocks on track for their worst month in a decade.

The Dow Jones Industrial Average dropped 464 points Thursday, bringing its losses to more than 1,700 points since Friday.

The benchmark S&P 500 index has slumped 10.6 percent this month and is almost 16 percent below the peak it reached in late September.

The steady gains of this spring and summer now fell like a distant memory. As we’ve entered the fall, investors started to worry that global economic growth is cooling off and that the U.S. could slip into a recession in the next few years. The S&P 500 is on track for its first annual loss in a decade.

The technology stocks that have led the market in recent years are now dragging it down. The technology-heavy Nasdaq composite is now down 19.5 percent from the record high it reached in August.

The market swoon is coming even as the U.S. economy is on track to expand this year at the fastest pace in 13 years. Markets tend to move, however, on what investors anticipate will happen well into the future, so it’s not uncommon for stocks to sink even when the economy is humming along.

Slowing economy a concern

Right now, markets are concerned about the potential for a slowing economy and two threats that could make the situation worse: the ongoing trade dispute between the U.S. and China, which has lasted most of this year, and rising interest rates, which act as a brake on economic growth by making it more expensive for businesses and individuals to borrow money.

The selling in the last two days came after the Federal Reserve raised interest rates for the fourth time this year and signaled it was likely to continue raising rates next year, although at a slower rate than it previously forecast.

Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said investors felt Fed Chairman Jerome Powell came off as unconcerned about the state of the U.S. economy, despite deepening worries on Wall Street that growth could slow even more in 2019 and 2020. Wren said investors want to know that the Fed is keeping a close eye on the situation.

“He may be a little overconfident,” said Wren. “The Fed needs to be paying attention to what’s going on.”

Powell also acknowledged that the Fed’s decisions are getting trickier because they need to be based on the most up-to-date figures on jobs, inflation, and economic growth. For the last three years the Fed told investors weeks in advance that it was almost certain to increase rates. But things are less certain now, and the market hates uncertainty

‘Completely overblown’

Treasury Secretary Steven Mnuchin said the market’s reaction to the Fed was “completely overblown.”

Investors have responded to a weakening outlook for the U.S. economy by selling stocks and buying ultra-safe U.S. government bonds. The bond-buying has the effect of sending long-term bond yields lower, which reduces interest rates on mortgages and other kinds of long-term loans. That’s generally good for the economy.

At the same time, the reduced bond yields can send a negative signal on the economy. Sharp drops in long-term bond yields are often seen as precursors to recessions.

The S&P 500 index skidded 39.54 points, or 1.6 percent, to 2,467.42. The Dow fell 464.06 points, or 2 percent, to 22,859.60 after sinking as much as 679.

The Nasdaq fell 108.42 points, or 1.6 percent, to 6,528.41. The Russell 2000 index of smaller companies dropped another 23.23 points, or 1.7 percent, to 1,326.

Stocks for smaller companies suffer

Smaller company stocks have been crushed during the recent market slump because slower growth in the U.S. will have an outsize effect on their profits. Relative to their size, they also tend to carry more debt than larger companies, which could be a problem in a slower economy with higher interest rates.

The Russell 2000 is down almost 24 percent from the peak it reached in late August and it’s down 13.6 percent for the year to date. The S&P 500, which tracks larger companies, is down 7.7 percent.

The possibility of a partial shutdown of the federal government also loomed over the market on Thursday, as funding for the government runs out at midnight Friday. In general, shutdowns don’t affect the U.S. economy or the market much unless they stretch out for several weeks, which would delay paychecks for federal employees.

Oil prices still dropping 

Oil prices continued to retreat. Benchmark U.S. crude fell 4.8 percent to $45.88 a barrel in New York, and it’s dropped 40 percent since early October. Brent crude, used to price international oils, slipped 5 percent to $54.35 a barrel in London.

After early gains, bond prices headed lower. The yield on the two-year Treasury rose to 2.87 percent from 2.65 percent, while the 10-year note rose to 2.80 percent from 2.77 percent.

The gap between those two yields has shrunk this year. When the 10-year yield falls below the two-year yield, investors call it an “inverted yield curve.” That hasn’t happened yet, but investors fear it will. Inversions are often taken as a sign a recession is coming, although it’s not a perfect signal and when recessions do follow inversions in the yield curve, it can take a year or more.

“The bond market has been telling us something for about a year, and that is there’s not going to be much inflation and there’s not going to be a sustained surge in economic growth,” said Wren, of Wells Fargo.

Around the world

In France, the CAC 40 lost 1.8 percent and Germany’s DAX fell 1.4 percent. The British FTSE 100 slipped 0.8 percent. Indexes in Italy, Portugal and Spain took bigger losses.

Tokyo’s Nikkei 225 lost 2.8 percent and Hong Kong’s Hang Seng gave up 1 percent. Seoul’s Kospi shed 0.9 percent.

As investors adjusted to the prospect of a weaker economy and lower long-term interest rates, the dollar fell to 111.11 yen from 112.36 yen. The euro rose to $1.1469 from $1.1368.

The British pound rose to $1.2671 from $1.2621. That sent the price of gold higher, and it gained 0.9 percent to $1,267.9 an ounce. Silver rose 0.3 percent to $14.87 an ounce and copper, which is considered an indicator of economic growth, fell 0.7 percent to $2.70 a pound.

Other fuel prices also fell. Wholesale gasoline lost 4.6 percent to $1.32 a gallon and heating oil slid 3.1 percent to $1.75 a gallon. Natural gas gave up 3.8 percent to $3.58 per 1,000 cubic feet. 
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The U.S.-China trade war is spooking potential investors in soybean crushing plants planned for Wisconsin and New York state, developers said, casting doubt on the future of a sector that had been a rare bright spot in the U.S. farm economy.

Crushers in the United States have been posting near-record profits by snapping up cheap and plentiful soybeans no longer purchased by China and making soymeal and soy oil for export to Europe and Southeast Asia.

But margins are not predictable as the United States and China attempt to resolve their trade differences before a March 2 deadline, adding another puzzle as investors parse out the costs and impacts of a trade dispute between the world’s two largest economies.

WSBCP LLC, or the Wisconsin Soybean Crushing Plant, is struggling to find backers for the state’s first soy processing facility because of uncertainty in agricultural and financial markets over the trade conflict, said Phil Martini, chief executive of industrial contractor C.R. Meyer & Sons Co, who is overseeing the project.

“I’m not a mental giant, but it doesn’t take one to think people are uncertain about what’s going on,” Martini said. “The crush margin is very good, but it can go the other way.”

China bought about 60 percent of U.S. raw soybean exports last year in deals worth $12 billion, but has mostly been buying beans from Brazil since imposing a 25 percent tariff on American soybeans in July in retaliation for U.S. tariffs on Chinese goods.

U.S. President Donald Trump and his Chinese counterpart Xi Jinping agreed on Dec. 1 not to impose additional tariffs for 90 days, a truce that spurred Chinese purchases of a few million tons of U.S. soybeans this month.

It is unclear when or if Beijing will remove its soy tariff, a move that would spur more deals and lift U.S. soybean prices in a boon to U.S. farmers and a blow to crushing margins.

Construction on the $150 million plant in Waupun, Wisconsin, is set to begin in 2019, with a projected opening in 2020, according to a June statement from the city, which owns the land where the facility would be located.

Martini said it remains to be seen whether the timetable needs to be postponed. He is also looking for livestock producers to commit to buying the plant’s products.

Kathy Schlieve, Waupun’s economic director, said the project would likely be delayed because the investor pool is not finalized.

“It’s different dynamic and we’re really trying to understand that,” Schlieve said about the trade war.

Shift from 2017

The uncertainty is a turnaround from last year when farmer-owned agricultural cooperatives were building new soybean crushing plants at the fastest rate in two decades after several years of large crops.

U.S. grain merchant Archer Daniels Midland Co set a new record for crush volumes in the third quarter and benefited from strong margins.

But after months of soybean futures prices hovering around 10-year lows due to the lack of Chinese buying, farmers have little room for new ventures.

“There isn’t a lot of extra money out there to invest in something like that,” said John Heisdorffer, an Iowa farmer and chairman of the American Soybean Association.

New York plant

The trade war also prolonged the search for investors for a $54 million soybean crushing plant that St. Lawrence Soyway Company is planning for Massena, New York, near the border with Canada, CEO Doug Fisher said.

Fisher tried to win over investors worried by the trade war with charts and graphs showing how the conflict improved margins for U.S. crushing plants.

“These tariffs with China rattle them, when in fact they have increased crush plant profits,” Fisher said.

As of Wednesday, the company had raised about 85 percent of the total, Fisher said.

St. Lawrence Soyway’s plant is projected to process soybeans into feed for dairy cows. The livestock industry has also been hit by Chinese tariffs on dairy products and pork, though.

“As those farmers are not doing as well, their ability to buy meal at higher prices is not there,” Fisher said.
…

A state of emergency has been declared in two eastern Sudan states after at least eight protesters were killed in mass demonstrations against rising prices.

Thousands of protesters marched in cities and towns across Sudan Thursday, angry over widespread corruption and the rising costs of basic goods, including bread.

Eyewitnesses in al-Qadarif said men wearing uniforms were among the protesters. Prices for food have skyrocketed in recent months, with inflation topping 60 percent. This comes after the government cut subsidies earlier this year.

Protesters there torched government buildings, including the headquarters of the ruling National Congress Party. Eyewitnesses in Atbara say the building was burned to the ground.

States of emergency were declared in the cities of al-Qadarif and Atbara.

Some of the Sudanese protesters are demanding a regime change. Many say they cannot earn a living or pay for basic needs like bread and fuel.

A Khartoum resident said students were planning to stage more protests Thursday around Khartoum University, but government security agents intervened and the students were ordered off the streets.

Police fired tear gas at hundreds of protesters within a kilometer of the presidential palace in Khartoum. Demonstrations were reported in Atbara, Port Sudan, Barbar, Nohoud and other cities.

The economy has deteriorated over the past several years after South Sudan became independent, depriving Khartoum of much of its oil revenue.

Carol Van Dam Falk and Kenneth Schwartz contributed.
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At least two people were killed in eastern Sudan as thousands took to the streets across the country on Thursday protesting against soaring prices, with some calling for the overthrow of President Omar al-Bashir, officials and witnesses said.

A student and another demonstrator died during violent protests in al-Qadarif, the city’s independent MP, Mubarak al-Nur, said. Police also fired teargas at around 500 people in the capital Khartoum, some of them chanting: “The people want the fall of the regime.”

Further north, in Dongola, protesters set fire to the local offices of Bashir’s ruling National Congress Party, witnesses said. To the northeast, protesters hiding their faces behind scarves came out for a second day in Atbara, chanting “freedom”, video footage showed. Car tires were set alight.

There was no immediate comment from the government.

They were among the worst protests since crowds came out against cuts to state subsidies in 2013, when again many called for a new government – a rare act in a state dominated by the army and security services.

Public anger has been building over price rises, inflation and other economic hardships – including a doubling in the cost of bread this year and limits on bank withdrawals.

Sudan’s economy has struggled to recover from the loss of three quarters of its oil output – its main source of foreign currency – since South Sudan seceded in 2011, taking most of the oilfields.

The United States lifted 20-year-old trade sanctions on Sudan a year ago. But many investors have continued to shun a country still listed by Washington as a state sponsor of terrorism, whose president is wanted by the International Criminal Court over charges of masterminding genocide in Darfur – charges he dismisses.

The latest violence erupted in Atbara on Wednesday, where local authorities declared a state of emergency after crowds set fire to the ruling party’s office there.

“I went out to protest because life has stopped in Atbara,” said a 36-year-old man who asked not to be named.

He said he had not been able to find any bread in the shops for four days.

“LIFE HAS STOPPED”

“Prices have increased and I have still not been able to withdraw my November salary … because of the liquidity crisis. These are difficult conditions that we can’t live with, and the government doesn’t care about us,” he told Reuters.

Economic conditions in Sudan have deteriorated sharply in recent months.

At 69 percent, Sudan’s inflation rate is among the world’s highest. Severe shortages have forced people to queue at bakeries and petrol stations.

In September, Bashir dissolved his government, citing Sudan’s “state of distress and frustration”, and slashed the number of ministries by a third cut costs.

In October, Sudan sharply devalued its currency after the government asked a body of banks and money changers to set the exchange rate on a daily basis.

The move led to further price increases and a liquidity crunch, while the gap between the official and black market rates has continued to widen.

“The protests began peacefully and then turned to violence and vandalism (on Wednesday),” Hatem al-Wassilah, governor of Nile River state, which includes Atbara, told Sudania 24 TV.

“The situation in al-Qadarif has become dangerous and the protests have developed to include fires and theft and it’s now out of control,” its independent MP, Mubarak al-Nur, said. He said one of the protesters who died was his relative.

Bashir took power in an Islamist and military-backed coup in 1989. Lawmakers this month backed a constitutional amendment to extend term limits that would have required him to step down in 2020.
…

The independent U.S. central bank raised borrowing rates Wednesday for the fourth time this year, dismissing President Donald Trump’s contention that policymakers ought not tinker with the country’s robust economy, the world’s largest. 

The Federal Reserve board voted 10-0 after a two-day meeting to increase its benchmark short-term interest rate — which is the rate that banks charge each other on overnight loans to meet reserve minimums — by a quarter percentage point to a range of 2.25 percent to 2.5 percent, its highest point in a decade.  

But the Fed also took note of clouds on the horizon for the U.S. economy, saying it expected to increase rates again only twice in 2019, not three times as it had previously projected.

It also cut its 2019 economic growth forecast for the U.S. from 2.5 percent to 2.3 percent, both figures well off the 4.2 percent U.S. growth in the April-to-June period and the 3.5 percent figure from July to September. 

Stock prices have sunk 

Policymakers said they would closely watch “global economic and financial market developments and assess their implications for the economic outlook.” In the last several weeks, stock market indexes in the U.S. and elsewhere have fallen sharply, a plunge for some U.S. market indicators that wiped out all previous 2018 gains. 

The interest rate set by the Fed often affects borrowing costs throughout the U.S., for major corporations and consumers, and often sets the standard for global lending rates. 

Trump had no immediate comment on the latest boost in interest rates, but earlier in the week implored policymakers to forgo another increase: 

But central bank policymakers operate independently of White House oversight, and Wednesday’s quarter-point increase had been widely expected.

Trump has basked in a robust U.S. economy, even as numerous investigations engulf him and his 2016 presidential campaign, and key advisers have quit his administration or been forced out.

U.S. trade disputes are ongoing with China, and world stock market volatility has cut investor gains in recent weeks. But the 3.7 percent jobless rate is the lowest in the United States in 49 years, worker wages are increasing and consumers — whose activity accounts for about 70 percent of the U.S. economy — are spending. 

​Unhappy with Powell

But Jerome Powell, the Fed board member Trump named a year ago as chairman, had drawn the president’s ire by overseeing three interest rate hikes this year ahead of the latest one.

Trump last month said he was “not even a little bit happy” with his appointment of Powell.

Trump has said he thinks the Fed is “way off base” by raising rates, but has been powerless to stop it from boosting them. Central bank policymakers have raised interest rates to keep the inflation rate in check and keep the economy from expanding too rapidly. 

“I’m doing deals and I’m not being accommodated by the Fed,” Trump told The Washington Post last month. “They’re making a mistake because I have a gut and my gut tells me more sometimes than anybody else’s brain can ever tell me.”

Some economists are predicting, however, that the decade-long improving U.S. economy could stall in the next year or so and perhaps even fall into a recession, which, if it occurs, would in most circumstances call for cutting interest rates to boost economic activity. 
…

The United States and China blamed each other for the crisis in the world trading system during a two-day “trade policy review” of the United States at the World Trade Organization.

The Chinese representative to the WTO, Hu Yingzhi, accused the United States of deforming the rules of world trade, which is having a detrimental impact on the economy and on American workers.

U.S. Ambassador to the WTO Dennis Shea retorted that the crisis was caused by China’s trade-distorting practices. He disputed the charge that the United States is the center of the crisis, saying instead that the U.S. is the epicenter of the solution.

WTO Trade Policy Review Division Director Willy Alfaro described the two-day debate as lively and engaged. He told VOA that member states expressed a number of concerns, including worry about a shift of focus in the U.S. trade policy, which is based on five pillars.

“The first one is the adoption of trade policies supporting the national security policy,” Alfaro said. “The second one is building a stronger U.S. economy and [third is] negotiating better trade deals, [fourth is] vigorous enforcement of domestic trade laws and rights under existing trade agreements, and finally reform of the multilateral trading system.” 

Alfaro said the U.S. has received a lot of support from member countries on the need to reform the multilateral trading system and to make it more transparent.

However, WTO officials said members also raised concerns regarding the introduction of new “Buy American” provisions, which could result in unnecessary trade barriers and increased protectionism. 

They also criticized U.S. agricultural policy, particularly the limited market access for certain commodities, high tariffs, and the continued use of trade distorting support.
…

Poland has signed a long-term deal with a U.S. company for supplies of liquefied natural gas as part of an effort to reduce its dependence on Russian energy, the two sides announced on Wednesday.

Port Arthur LNG, a subsidiary of San Diego-based Sempra Energy, and Poland’s state gas company PGNiG jointly announced the agreement for the sale of 2.7 billion cubic meters per year of gas to Poland over a 20-year period.

Their statement said that is enough to meet about 15 percent of Poland’s daily gas needs.

“This agreement marks an important step toward Poland’s energy independence and security,” the U.S. Secretary of Energy Rick Perry said.

Sempra Energy’s CEO Jeffrey Martin said the deal helps his company “advance our vision to become North America’s premier energy infrastructure company.”

No financial details were disclosed, in line with the secretive nature of gas deals, which are sensitive politically given Russia’s dominance of Europe’s energy market.

In recent weeks Poland also signed long-term deals for gas with American suppliers Cheniere and Venture Global Calcasieu Pass and Venture Global Plaquemines LNG.

These deals have been sealed as both Poland and the United States have been trying to stop Nord Stream 2, a pipeline under construction that, when finished, would transport gas from Russia to energy-hungry Germany.

Poland, along with several other European countries, see Nord Stream 2, which bypasses Ukraine, as a political project meant to weaken that country and gain leverage over Europe by making it more dependent on Russian gas.

Officials for the Nord Stream 2 dispute that view, saying it is merely a commercial project and would not cut off Ukraine, pointing to diversification of Europe’s gas market.

Also Wednesday, U.S. Deputy Secretary of State John Sullivan met with Polish Foreign Minister Jacek Czaputowicz in Warsaw, the last stop in a visit to several countries in the region.

Ahead of his visit the State Department said he would meet with Polish leaders to discuss shared concerns over Nord Stream 2, among other issues.

Czaputowicz told reporters in Warsaw that Nord Stream 2 is “harmful to the security of all of the European Union.”

He called Germany’s support for the project “anti-European” and also faulted Austria for using its six-month EU presidency, which ends this month, to keep the issue off Europe’s agenda.

 
…

The White House and Congress appeared headed toward agreement Wednesday on a stopgap spending plan to avert a partial government shutdown at midnight Friday, but it does not include the $5 billion President Donald Trump wanted for construction of a wall along the U.S.-Mexico border.

Senate Republican leader Mitch McConnell said the Senate would vote later in the day on the measure funding operations for a quarter of the U.S. government until Feb. 8, when Trump and lawmakers could again face the possibility of a partial closure.

Democratic leader Charles Schumer said Democrats would support the temporary spending plan, with the remainder of the U.S. government already funded through the end of next September.

Trump made a pledge during his 2016 campaign to build a border wall to thwart illegal immigration and make Mexico pay for it. The president, however, has not been able to secure U.S. taxpayer funding for it even though both houses of Congress currently are under the control of his Republican Party.

He faces an even more daunting political challenge in the new year, when Democrats, who are adamantly opposed to the wall, take control of the House of Representatives, while Republicans retain their Senate majority.

On Twitter, Trump said, “One way or the other, we will win on the Wall!”

Trump aide Kellyanne Conway told reporters that the U.S. leader would “take a look at” the stopgap funding plan, “certainly.”

Trump last week said he would “proudly” own a shutdown in order to get $5 billion in funding for construction of a wall along the 3,200-kilometer border with Mexico; but, without enough votes in Congress, Trump retreated Tuesday, with the White House saying it would look for “other ways” to secure funding by trying to tap unused money from several federal agencies.

“We’ll see what happens,” Trump said. “It’s too early to say. We need border security.”

Democrats have proposed keeping 2019 funding at $1.3 billion for border security fencing and other improvements, but not specifically for the wall.

In a pair of tweets, Trump blamed opposition Democrats for the spending impasse, although some Republicans also oppose construction of the wall.

“In our Country, so much money has been poured down the drain, for so many years, but when it comes to Border Security and the Military, the Democrats fight to the death,” he said.

Trump wrongly claimed that “Mexico is paying (indirectly) for the Wall” through the new U.S. trade deal with Mexico and Canada, with “far more money coming to the U.S.” But the pact has yet to be ratified by Congress and has not taken effect.

Congress has approved funding for three-quarters of U.S. government operations through Sept. 30, but the remaining quarter left without a 2019 spending plan includes the Department of Homeland Security, which oversees border control operations, and the State Department handling U.S. diplomatic operations.

If a deal is not reached to avert the partial government shutdown, the affected agencies would start winding down nonessential operations Friday, with more than 800,000 federal workers furloughed or working for no pay.

On Tuesday, McConnell proposed $1.6 billion for border fencing — money already agreed upon in a bipartisan Homeland Security bill — and an additional $1 billion Trump could use to spend on the border.

McConnell called the offer “reasonable.” Democratic leaders said no.

House Democratic leader Nancy Pelosi said she and Schumer could “not support the offer they made of a billion-dollar slush fund for the president to implement his very wrong immigration policies.”
…

Uber lost its latest court bid Wednesday to stop British drivers from being classified as workers, entitling them to rights such as the minimum wage, in a decision which jeopardizes the taxi app’s business model.

Two drivers successfully argued at a tribunal in 2016 that the Silicon Valley firm exerted significant control over them to provide an on-demand service and that they should cease to be considered self-employed, which gives few protections in law.

An employment appeal tribunal upheld that decision last year prompting Uber to go to the Court of Appeal, which ruled against the firm in a decision handed down Wednesday.
…