2024-08-22 19:14

Impact to be short-lived if stoppage ends in 7-10 days Hit to economy to rise exponentially beyond a few weeks Estimates say 4-week stoppage could see 49,000 job losses OTTAWA, Aug 22 (Reuters) - Canada's economy could shrink by billions of dollars this year if a rail stoppage that began on Thursday continues for weeks, and the knock-on effects would swell jobless numbers and consumer prices, economists and analysts warned. However, the economic impact could be minimal if the stoppage lasts less than a week, they said. Canada's two biggest freight rail operators Canadian National Railway (CNR.TO) , opens new tab and Canadian Pacific Kansas City (CP.TO) , opens new tab locked out workers affiliated with the Teamsters union on Thursday, after both companies and the union failed to conclude labor deals. "If you have a stoppage that is extended, that drags out, that could be really devastating," said Pedro Antunes, chief economist at the Conference Board of Canada, an economic think-tank. A two-week rail strike would result in a $3-billion loss in nominal GDP this year, and a four-week strike could lower GDP by nearly $10 billion in 2024, he said, adding it could result in 49,000 job losses in the year. The unprecedented simultaneous stoppage of the majority of Canada's rail freight is "growth-negative and inflation-positive," said Robert Kavcic, senior economist with BMO Capital Markets. Kavcic expects that the stoppage could shave around 0.1 percentage points each week from economic growth, "but the impact could build the longer it drags on," he warned. This translates into a weekly impact of over $2 billion in nominal GDP terms. Canada's economic growth has been lackluster this year as consumers and businesses reeled under near 23-year-high interest rates before the Bank of Canada started trimming its policy rate in June. After cutting interest rates in July for a second straight month, Governor Tiff Macklem hinted at shifting the bank's focus to boosting the economy rather than suppressing inflation. First-quarter GDP growth was 1.7%, far below the bank's April forecast, and weakness in the economy made it scale down growth expectations this year to 1.2% from 1.5% in April. Economists have said that rising unemployment, which hit a 30-month high last month, and a wave of around C$300 billion ($220.78 billion) in mortgage renewals next year, will keep economic conditions strained. Amid all this, a protracted rail stoppage could lead to economic inertia, warned economists. Derek Holt, head of capital markets economics at Scotiabank (BNS.TO) , opens new tab said that a one- to three-week strike could have a 0.1%-0.2% monthly drag on GDP, but its impact would rise exponentially with each passing day beyond three weeks. The world's second-largest country by area, Canada relies heavily on CN and CPKC to ship grain, fertilizers and other commodities, along with manufactured goods such as chemicals and automobiles. The total rail freight cargo hauled annually in Canada tops C$380 billion, with the vast majority moving on CN and CPKC's tracks. Randall Bartlett, senior director of Canadian economics at Desjardins, said past rail stoppages have not usually continued beyond a week or 10 days. "If it is short-lived like (in the) past, the impact is minimal," he said, adding a stoppage would do significant economic damage if it continues beyond a few weeks. ($1 = 1.3588 Canadian dollars) Sign up here. https://www.reuters.com/business/autos-transportation/canadas-rail-shutdown-could-hit-gdp-hard-kill-jobs-if-protracted-2024-08-22/

2024-08-22 18:46

MILAN, Aug 22 (Reuters) - A series of "indescribable, unreasonable errors" by the crew led to the shipwreck in which British tech entrepreneur Mike Lynch and six others died earlier this week, the yacht manufacturer's CEO told Reuters on Thursday. The British-flagged Bayesian, a 56-metre-long (184-foot) superyacht with 22 people aboard - 12 passengers and 10 crew - capsized and sank on Monday within minutes of being hit by a pre-dawn storm while anchored off the coast of northern Sicily. "The boat suffered a series of indescribable, unreasonable errors, the impossible happened on that boat ... but it went down because it took on water. From where, the investigators will tell," Giovanni Costantino said in an interview. Costantino helms The Italian Sea Group (TISGR.MI) , opens new tab, which includes Perini Navi, the Italian high-end yacht maker that built the Bayesian in 2008. The vessel has been refitted twice, last in 2020, but not by Perini. The CEO ruled out any design or construction errors, which he called unlikely after 16 years of trouble-free navigation, including in more severe weather than on Monday. He blamed the Bayesian's crew for the "incredible mistake" of not being prepared for the storm, which had been announced in shipping forecasts. "This is the mistake that cries out for vengeance," he said. Costantino said passengers should have been summoned out of their cabins and assembled at a point of safety while the boat was being prepared for the storm by pulling up the anchor, closing doors and hatches, lowering the keel to increase stability and other measures. Six out of 12 passengers died in the shipwreck, and five bodies were found inside the wreck. Emergency services are still trying to locate the body of the last missing person, Lynch's daughter Hannah. Had correct procedures been followed, all passengers would have gone back to sleep after one hour "and the next morning they would have happily resumed their wonderful cruise," Costantino said. Another yacht anchored near the Bayesian escaped unharmed. The captain of the sunken yacht and other crew members have not commented publicly on the disaster, while Italian prosecutors investigating it are due to hold a press conference on Saturday. Sign up here. https://www.reuters.com/world/europe/indescribable-crew-errors-led-sicily-shipwreck-yacht-maker-says-2024-08-22/

2024-08-22 18:34

Mexico inflation undershoots forecasts in early August Economic growth was tepid in second quarter Central bank cut interest rates 25 basis points in early August Analysts see higher chances of new rate cut in September Aug 22 (Reuters) - Mexico's statistics agency INEGI released on Thursday a series of data showing that inflation slowed more than expected while growth remained tepid, opening the door for the country's central bank to deliver a new interest rate cut next month. The Bank of Mexico (Banxico) lowered its benchmark interest rate to 10.75% from 11% in a split vote in early August, despite higher forecasts for year-end headline inflation, and reinforced its view on Thursday that further policy adjustments were on the table. Another rate cut when policymakers meet again on Sept. 26 is now seen as more likely, especially after INEGI reported that annual inflation undershot market forecasts in its mid-August print, easing more than expected. In Latin America's second-largest economy, 12-month headline inflation came in at 5.16% in the first half of August, down from the 5.61% registered a month earlier and below the 5.31% forecast by economists polled by Reuters. That is still well above the bank's 3% inflation target, plus or minus 1 percentage point. The closely monitored core consumer price index - seen as a better gauge of price trends because it strips out volatile energy and food prices - continued to ease, with the annual reading falling below 4% for the first time since early 2021. "Was Mexico's August rate cut justified? Below-consensus bi-weekly headline and core CPI say 'yes'," VanEck's chief emerging markets economist Natalia Gurushina said. "However, further disinflation and sizable fiscal consolidation are key to avoid the perception of running ahead of the curve." Two members of Banxico's five-person board spoke out against the recent rate cut, saying the move undermines the central bank's credibility as the bank upped its forecast for year-end headline inflation to 4.4%, from 4.0% previously. But if the moderation in consumer prices is confirmed in the second half of August, analysts at CIBanco said in a note to clients, the possibility of a new cut by Banxico at its next meeting increases. TEPID GROWTH Soft economic activity might lend some additional support to the board's more dovish members. INEGI data on Thursday showed that Mexico's gross domestic product (GDP) expanded 0.2% in the second quarter from the previous three-month period, in line with market expectations but reinforcing a slowdown trend seen since late last year. In annual terms, growth in the April-June quarter sat at 2.1%, while economists polled by Reuters and a preliminary estimate released by INEGI last month had pointed to a 2.2% expansion. Banorte economists said the Mexican economy faces "relevant challenges" in the second half of the year. Some bright spots might emerge, they added, but acknowledged there were downside risks to their own 1.9% annual GDP growth forecast. Economic activity in June, INEGI added in a separate report, was unchanged from the previous month and dropped 0.6% on a yearly basis - both below consensus. "The August mid-month CPI print, alongside the weak activity data for June and the Fed's confirmation that it will kick off its loosening cycle next month means that we expect Banxico to lower its policy rate by another 25 basis points in September," Capital Economics economist Kimberley Sperrfechter said. Sign up here. https://www.reuters.com/markets/mexicos-gdp-inflation-figures-support-bets-september-rate-cut-2024-08-22/

2024-08-22 18:34

Aug 22 (Reuters) - The International Atomic Energy Agency (IAEA) said on Thursday its Director General Rafael Grossi will assess the situation at Kursk nuclear power plant during his visit next week. IAEA also said it had been informed by the Russian Federation that the remains of a drone had been found within the Kursk nuclear power plant. Russian President Vladimir Putin on Thursday accused Ukraine of trying to strike the Kursk nuclear power plant in an overnight attack. Acting Kursk Governor Alexei Smirnov told Putin the situation at the Kursk plant was "stable." Sign up here. https://www.reuters.com/world/europe/iaeas-grossi-visit-kursk-nuclear-plant-after-drone-attack-2024-08-22/

2024-08-22 17:25

Aug 22 (Reuters) - Ark Labs, a three-month old startup developing solutions to speed up bitcoin transactions and lower costs, has raised $2.5 million in a pre-seed funding round led by billionaire investor Tim Draper. Besides venture capital firm Draper Associates, Fulgur Ventures, Axiom Capital and angel investor Stephen Cole also participated in the round, the startup said on Thursday. WHY IT'S IMPORTANT The funding underscores Silicon Valley's growing interest in the companies seeking to make crypto, particularly bitcoin, a mainstream mode of payment. The world's biggest cryptocurrency has grown into a formidable asset class, with billions of dollars in inflows from traders, particularly after exchange-traded funds tracking its price were approved in January. However, some analysts say bitcoin will need to have more utility to sustain its high level of interest. Ark said it will use the funds to expand its team and enhance its technology. CONTEXT Draper, who founded Draper Associates in 1985, has also invested in SpaceX, Tesla (TSLA.O) , opens new tab, Coinbase (COIN.O) , opens new tab and Robinhood (HOOD.O) , opens new tab. He also led a funding round in bitcoin lending company Zest Protocol in May. KEY QUOTES "Today, we have to focus not only on how to buy and store bitcoin but how to use it as a medium of exchange for everyday purposes," Draper said. Ark allows for "seamless bitcoin payments," he added. "Bitcoin adoption faces a strong headwind until any non-technical person can safely achieve exposure," said Henry Robinson, co-founder of crypto mining firm Decimal Digital Currency. "As mature investors and mature capital with longer timeframes grow their positions in bitcoin, the asset class will mature and their approach will trickle down to individual asset and fund managers." Sign up here. https://www.reuters.com/technology/tim-draper-leads-25-mln-funding-round-crypto-startup-ark-labs-2024-08-22/

2024-08-22 16:09

NEW YORK, Aug 22 (Reuters) - The average rate on the popular U.S. 30-year fixed-rate mortgage ticked down this week to the lowest level since May 2023, but may need to fall further for the housing market to see significant improvement in demand. The 30-year fixed-rate mortgage averaged 6.46% during the week ending Aug. 22, down from 6.49% in the prior week, mortgage finance agency Freddie Mac said on Thursday. It averaged 7.23% during the same period a year ago. A softening tone to incoming economic data implies that rates will continue to ease through the end of the year, Sam Khater, Freddie Mac's chief economist, said in a statement. Although rates have been steadily declining, the lower rates have "not been enough to motivate potential homebuyers. We expect rates likely will need to decline another percentage point to generate buyer demand," Khater said. Earlier on Thursday the National Association of Realtors said existing home sales rose 1.3% in July, ending a four-month decline. "Consumers are definitely seeing more choices, and affordability is improving due to lower interest rates," said Lawrence Yun, the NAR's chief economist. But even with the modest gain, home sales are still slow, Yun said. Sign up here. https://www.reuters.com/markets/us/us-30-year-fixed-rate-mortgage-slips-lowest-level-since-may-2023-2024-08-22/