U.S. Senator Bob Casey (D-PA) delivers remarks at the Belmont Water Treatment Center during a visit to Philadelphia, Pennsylvania, U.S., February 3, 2023. REUTERS/Elizabeth Frantz Acquire Licensing Rights
Nov 9 (Reuters) – Two U.S. senators plan to introduce a bipartisan bill on Thursday that would require private equity firms to make public how much they invest in China and other countries of concern.
The bill, set to be introduced by Democratic Senator Bob Casey and Republican Senator Rick Scott, is the latest effort to track U.S. investments in China.
“The American people deserve to know where and how their savings are being invested,” Casey said in a statement.
The United States has sought to crack down on U.S. investment in China over fears U.S. dollars and know-how are aiding Beijing’s technological advances to modernize its military.
U.S. private investment firms have poured more than $80 billion into China between 2018 and 2022, some via pension plans, according to Casey’s office.
The new congressional measure would require private equity funds to annually disclose assets invested in China, Iran, Russia and North Korea to the U.S. Securities and Exchange Commission, which would then be required to make public a report based on the information.
It would also require disclosure of certain information about private security sales.
Rick Scott’s office did not immediately respond to an emailed request for comment.
Casey has also co-sponsored a measure that would require government notification of investments in certain sensitive technology sectors in China. That measure has been added as an amendment to the Senate’s National Defense Authorization Act (NDAA) and may or may not survive reconciliation with the House’s version.
The new bill also comes in the wake of an executive order on outbound investment to prohibit some U.S. investments in China in semiconductors and microelectronics, quantum computing and artificial intelligence, and require notification of others. The order has not yet been implemented.
Reporting by Karen Freifeld; Editing by Sharon Singleton
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U.S Representative Andy Barr (R-KY), Rep. Mike Gallagher (R-WI), and Rep. Blaine Luetkemeyer (R-MO) attend a House Select Committee on the Chinese Communist Party hearing entitled “The Chinese Communist Party’s Threat to America,” in Washington, U.S., February 28, 2023. REUTERS/Nathan Howard/File Photo Acquire Licensing Rights
Sept 19 (Reuters) – The chair of the U.S. House of Representatives’ committee on China on Tuesday planned to meet with a semiconductor industry group to express concerns over U.S. investments in China’s chip industry, according a source familiar with the matter.
Representative Mike Gallagher, an influential Republican lawmaker whose select committee has pressed the Biden administration to take a tougher stance on sending U.S. technology to China, planned to meet with the Semiconductor Industry Association, which represents major chip firms such as Nvidia (NVDA.O) and Intel (INTC.O) whose sales to China have been affected by U.S. export rules, the source said.
Gallagher planned to tell the group he believes that U.S. rules enacted last October that cut off the sale of advanced artificial intelligence chips to China should be tightened to cover less advanced chips, the source said. The source added that Gallagher also aimed to talk with the group about reducing the number of semiconductor manufacturing machines that could be sent to China.
Also among the planned discussion topics is U.S. investment in Chinese chip firms. Intel, Qualcomm (QCOM.O) and other firms have venture capital arms that have invested in Chinese technology companies, the source added.
Gallagher also will express his concerns that a massive Chinese effort to build up capacity to build less advanced chips used in automobiles, washing machines and other everyday products could one day result in China dumping those chips on the U.S. market and drive U.S. makers of such chips out of business, the source said.
A representative for the Semiconductor Industry Association did not immediately return a request for comment.
Reporting by Stephen Nellis in San Francisco
Editing by Nick Zieminski
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A sign is seen outside the 11 Wall St. entrance of the New York Stock Exchange (NYSE) in New York, U.S., March 1, 2021. REUTERS/Brendan McDermid Acquire Licensing Rights
A look at the day ahead in U.S. and global markets from Mike Dolan
World markets stayed remarkably buoyant even as the chances of one more U.S. interest rate hike have moved firmly onto the radar, with China’s bourses extending Monday’s rally and the state of U.S. employment now top of mind.
For the first time since before the regional banking crisis in March, U.S. futures now see more than a 50% chance of yet another Federal Reserve rate rise to 5.5-5.75% – where the median of Fed policymaker forecasts from their June meeting still lies. Early Tuesday, futures priced almost a two-thirds chance of that additional quarter-point move in November.
After almost two months of stability in assuming peak rates would be where they are now, the chances of another tightening have been creeping higher again over the past 10 days and appear to be cementing following Fed Chair Jerome Powell’s relatively hawkish speech at Jackson Hole on Friday.
And yet – perhaps with the uncertainty dissipating, the economy still robust and bond markets better priced – world markets appear to be taking the tighter odds in their stride.
Wall St’s S&P500 (.SPX) clocked only its second-consecutive gain of the month so far on Monday, while MSCI’s all-country index (.MIWD00000PUS) is on course for its sixth gain in seven trading days.
More impressively in the circumstances, restive bond markets calmed down and bond yields continued to dial back from their highest in over a decade last week. Two-year Treasury yields fell back below 5%, with 10-year yields eyeing their lowest in almost two weeks at 4.17% and equity risk gauges such as the VIX (.VIX) of implied volatility touching two-week lows too.
The dollar (.DXY) was firm, but stayed off last week’s near three-month high.
With the Atlanta Fed’s real-time estimate of quarterly real GDP growth running as high as 5.9% – about 9% in nominal terms – the Fed will likely need to see some considerable softening of incoming economic data to prevent it moving again.
This week the onus falls largely on the labor markets, with the national payrolls report due Friday but with July readings on job openings due later on Tuesday – alongside August consumer confidence numbers and June house price data.
Friday’s August payrolls report is expected to show a slowdown in monthly hiring to about 150,000 but an unchanged unemployment rate of just 3.5%.
Overseas, China’s embattled stock markets managed to advance for a second day – lifted by a series of support measures and hopes of some detente in the economic and financial standoff between Washington and Beijing amid a three-day visit to China by U.S. Commerce Secretary Gina Raimondo.
Although it gave back the bulk of Monday’s 5% early surge by the close of business, China’s CSI300 (.CSI300) push 1% higher again on Tuesday after weekend measures to slash stamp duty on stock purchases and limit new stock listings. With tech and healthcare sectors leading the way, foreigners were net buyers again on Tuesday.
Just how cash-strapped embattled Country Garden Holdings (2007.HK) is will be the focus when China’s largest private property developer is due to report its first-half results on Wednesday.
Asia bourses more widely and European indices were higher, while Wall St futures were flat ahead of the open.
Tropical Storm Idalia closed in on Florida’s Gulf Coast on Tuesday after skirting past Cuba, headed for a U.S. landfall as a powerful Category 3 storm, prompting authorities to order evacuations of vulnerable shoreline areas.
Events to watch for on Tuesday:
* U.S. August consumer confidence, July JOLTS job openings data, June house prices, Dallas Fed Aug service sector survey
* Federal Reserve Vice Chair for Supervision Michael Barr speaks
* U.S. Treasury auctions 7-year notes
* U.S. corporate earnings: Best Buy, HP, JM Smucker, Catalent, Pinduoduo
By Mike Dolan, editing by Susan Fenton <a href=”mailto:mike.dolan@thomsonreuters.com” target=”_blank”>mike.dolan@thomsonreuters.com</a>. Twitter: @reutersMikeD
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
A look at the day ahead in U.S. and global markets from Mike Dolan, Editor-at-Large, financial industry and financial markets
As investors switch attention to the health of the U.S. consumer, a funk in China’s economy, markets and currency appeared to deepen and emerging market ructions spread.
After another disappointing reading for industrial production and retail sales this month, China’s central bank scrambled to cut 1-year lending rates by 15 basis points to 2.50% – the second cut in policy rates in three months – and sent the yuan sliding to 2023 lows against the dollar.
China stocks fell again (.CSI300) and 10-year government bond yields fell to three-year lows.
Perhaps more worrying for those fretting about the broader stability of China’s economy, the corrosive real estate bust saw property investment fall for the 17th straight month amid creeping deflation fears and the government suspended publication of spiralling youth unemployment rates.
The contrast with the U.S. picture is stark right now.
The ongoing reassessment of the U.S. economy now has as many as three in four fund managers around the world assuming there will either be a soft landing or even no landing for the economy over the next 12 months, according to Bank of America’s latest monthly investor poll.
As cash holdings have been reduced in August, asset managers have reduced their underweight equity positions and, rather surprisingly given the hit to bond prices this month, upped global bond allocations to a net 5% overweight. The latter is now some 2.2 standard deviations above long-term averages.
And yet, in part due to a rethink of the long-term sustainable interest rate over the horizon, long-term U.S. Treasury yields continue to climb – even in tandem with a tech-led rebound in stock prices (.SPX) on Monday. Ten-year Treasury yields hit their highest for the year at 4.23%.
With inflation expectations subdued , 10-year inflation-adjusted Treasury yields hit their highest in 14 years at 1.87% – with eyes now trained on any long-term Fed guidance from its annual Jackson Hole conference later this month.
A combination of rising real U.S. yields and robust readings for the U.S. economy – which should be reinforced by the July retail sales report on Tuesday – and increasingly turbulence in China and many emerging economies is supercharging the dollar in many quarters.
Despite news of forecast-beating accelerating growth in Japan in the second quarter, the yen skidded to its lowest in 10 months on Tuesday alongside the yuan slide.
Elsewhere in the so-called BRICS emerging economies – the grouping of Brazil, Russia, India, China and South Africa – the dollar was also in command.
Isolated economically and financially from the West for over a year after its invasion of Ukraine, Russia raced to shore up its plummeting rouble on Tuesday with an emergency interest rate hike of 3.5 percentage points to 12% – with only modest success so far.
Jarred by the surprise emergence of a far-right presidential candidate in Argentina’s primary elections – who has an agenda to dollarize the hyperinflation-dogged economy – the peso was devalued again on Monday. Argentina’s incumbent government wants to join the BRICS grouping too.
And even India’s rupee was on the slide to a 10-month low.
Back stateside, the retail sales report will be accompanied by an earnings update from Home Depot – the first of the big retailers to report this week. Housing market sentiment indicators are also out.
S&P500 futures were off a touch before the open.
Events to watch for on Tuesday:
* U.S. corporate earnings: Home Depot, Agilent Technologies, Cardinal Health, Jack Henry
* U.S. July retail sales, July import/export prices, NAHB August housing index, NY Fed August manufacturing, June TIC data on Treasury holdings, June business inventories; German August ZEW investor survey; Canada July inflation, home sales and June manufacturing
* Minneapolis Federal Reserve President Neel Kashkari speaks
By Mike Dolan, editing by Susan Fenton; <a href=”mailto:mike.dolan@thomsonreuters.com” target=”_blank”>mike.dolan@thomsonreuters.com</a>. Twitter: @reutersMikeD
Our Standards: The Thomson Reuters Trust Principles.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
U.S. President Joe Biden delivers remarks on access to mental health care in the East Room of the White House in Washington, U.S., July 25, 2023. REUTERS/Elizabeth Frantz/File Photo
NEW YORK/WASHINGTON, Aug 9 (Reuters) – President Joe Biden on Wednesday signed an executive order that will narrowly prohibit certain U.S. investments in sensitive technology in China and require government notification of funding in other tech sectors.
The long-awaited order authorizes the U.S. Treasury secretary to prohibit or restrict certain U.S. investments in Chinese entities in three sectors: semiconductors and microelectronics, quantum information technologies, and certain artificial intelligence systems.
Biden said in a letter to Congress he was declaring a national emergency to deal with the threat of advancement by countries like China “in sensitive technologies and products critical to the military, intelligence, surveillance, or cyber-enabled capabilities.”
The proposal targets investments in Chinese companies developing software to design chips and tools to manufacture them. The U.S., Japan and the Netherlands dominate those fields, and the Chinese government has been working to build up homegrown alternatives.
The move could fuel tensions between the world’s two largest economies, although U.S. officials insisted the prohibitions were intended to address “the most acute” national security risks and not to separate the two countries’ highly interdependent economies.
Senate Democratic Leader Chuck Schumer praised Biden’s order, saying “for too long, American money has helped fuel the Chinese military’s rise. Today the United States is taking a strategic first step to ensure American investment does not go to fund Chinese military advancement.” He says Congress must enshrine restrictions in law and refine them.
Republicans said the Biden order did not go far enough.
House Foreign Affairs Committee Chairman Michael McCaul praised the move to restrict new outbound investments in China but said “the failure to include existing technology investments as well as sectors like biotechnology and energy is concerning.”
The order is aimed at preventing American capital and expertise from helping develop technologies that could support China’s military modernization and undermine U.S. national security. It is focused on private equity, venture capital, joint venture and greenfield investments.
Most investments captured by the order will require the government be notified about them. Some transactions will be prohibited. The Treasury said it anticipates exempting “certain transactions, including potentially those in publicly-traded instruments and intracompany transfers from U.S. parents to subsidiaries.”
A spokesman for the Chinese Embassy in Washington did not immediately respond to a request for comment on Wednesday but the embassy said Friday the United States “habitually politicizes technology and trade issues and uses them as a tool and weapon in the name of national security.”
Repbulican Senaor Marco Rubio said the Biden administration’s “narrowly tailored proposal is almost laughable. It is riddled with loopholes, explicitly ignores the dual-use nature of important technologies, and fails to include industries China’s government deems critical.”
Democratic Senator Bob Casey said Biden’s order “acknowledges the urgency of the issue and will allow the U.S. to reduce some of the risks we face from bad actors like China.”
The regulations will only affect future investments, not existing ones, an administration official told Reuters.
The Biden administration said it engaged with U.S. allies and partners as it developed the restrictions “and will continue coordinating closely with them to advance these goals.” It added the executive order reflects discussions with the Group of Seven countries.
It is expected to be implemented next year, a person briefed on the order said, after multiple rounds of public comment, including an initial 45-day comment period.
Regulators plan to issue an advance notice of proposed rulemaking to further define the scope of the program and a comment period to solicit public feedback before making a formal proposal.
Sources previously told Reuters investments in semiconductors that will be restricted are expected to track export control rules for China issued by the U.S. Department of Commerce in October.
Emily Benson of the Center for Strategic and International Studies (CSIS), a bipartisan policy research organization, said she expects investments in artificial intelligence to be prohibited to military users and uses, and that other investments in the sector will only require notification to the government.
Benson said the burden will fall on the administration to determine what AI falls into the military category.
“They will have to draw a line of what constitutes a military application of AI, and to define AI,” said Benson, director of CSIS’s project on trade and technology.
The regulations concerning AI are still in development, the person briefed on the order said. The person said the same was also true for quantum computing but that it was expected to prohibit certain sensors and other things related to the technology.
The person added that there could be potential exemptions related to universities and research.
Reporting by David Shepardson, Andrea Shalal, Stephen Nellis, Max Cherney and Karen Freifeld; additional reporting by Idrees Ali; Editing by Lincoln Feast and Jonathan Oatis
Our Standards: The Thomson Reuters Trust Principles.
[1/2]The BlackRock logo is pictured outside their headquarters in the Manhattan borough of New York City, New York, U.S., May 25, 2021. REUTERS/Carlo Allegri/File Photo
WASHINGTON, Aug 3 (Reuters) – The chairman of a U.S. congressional committee on China held out the possibility on Thursday of subpoenas for executives from asset management firm BlackRock and index provider MSCI if they do not provide “fulsome” answers about investments in blacklisted Chinese companies.
The House of Representatives select committee on competing with China said on Tuesday it was investigating BlackRock (BLK.N) and MSCI (MSCI.N) for facilitating the flow of American capital into companies the U.S. government has found guilty of fueling China’s military advancement or human rights abuses.
“I don’t seek an antagonistic relationship with anybody but it’s fair to say we want answers,” Representative Mike Gallagher told Reuters in an interview when asked about the possibility of issuing subpoenas over the issue.
“In the law that created the committee we were given subpoena authority for a reason, which is to do our investigation and our oversight in a thorough and robust yet fair fashion,” he said.
“Our hope is that we will get a cooperative and fulsome response from BlackRock and MSCI, and I think our goal is for that response to inform policy and legislation, particularly as we debate this question of guardrails on outbound capital flows,” Gallagher said.
The companies did not respond immediately to requests for comment on Gallagher’s remarks.
BlackRock has said all of its investments in China and around the world comply with U.S. law, and that it will continue engaging with the select committee on the issues it raised. MSCI has said it was “reviewing the inquiry” from the committee.
Representative Raja Krishnamoorthi, the top Democrat on the Republican-led panel, said the goal is not to cut off investment into all Chinese firms, but just those with interests counter to U.S. values.
“They’re not just run of the mill companies. We’re talking about companies that build the J-20 fighter jet, artillery shells for the PLA, they develop software to surveil Uyghurs,” Krishnamoorthi said, using an abbreviation for China’s People’s Liberation Army.
Separately, Gallagher sent a letter to the White House urging President Joe Biden to include curbs on “problematic” U.S. holding of some Chinese stock and bonds in an anticipated executive order restricting outbound investment to China.
“Any rules that exempt them will fail to address the bulk of the national security threat,” he wrote.
Republicans formed the select committee when they took control of the House in January, part of an effort to raise awareness about issues behind growing tensions with China. A hard line toward China is one of the few policies with bipartisan support in the deeply divided U.S. Congress.
The committee does not write legislation, but makes policy recommendations and can subpoena executives and officials.
The committee held a roundtable with farmers in Dysart, Iowa, on Thursday to examine the risk of Chinese-government backed theft of agricultural technology, the latest in a series of events it has held outside of Washington.
The committee says current U.S. tools are insufficient to protect such technology from theft, and that it needed ideas from farmers on legislation to do so.
“We have a duty to protect all our technology, whether it’s in Silicon Valley, or in a cornfield here in Iowa,” Gallagher said at the event.
Reporting by Michael Martina and Patricia Zengerle
Editing by Don Durfee and Lincoln Feast
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WASHINGTON, June 14 (Reuters) – A U.S. House of Representatives committee on Wednesday narrowly voted to raise the mandatory commercial pilot retirement age to 67 from 65.
Members of the House Transportation and Infrastructure Committee voted 32 to 31 for the pilot age amendment to a proposed five-year bill to reauthorize the Federal Aviation Administration (FAA) aviation safety and infrastructure programs for the next five years.
The proposal faces opposition from unions and an uncertain fate by a U.S. Senate committee, which will consider its version of the FAA measure on Thursday.
The Regional Airline Association (RAA) praised the pilot age hike. Earlier, the association said 324 airports have lost, on average, a third of their air service, including 14 small airports that have lost all service, with more than 400 airplanes parked due to a lack of pilots.
The Air Line Pilots Association (ALPA) opposed raising the retirement age. Even if the proposal is approved, the union noted that international rules would still prevent pilots older than 65 from flying in most countries outside the U.S.
ALPA called the proposal a “politically driven choice that betrays a fundamental understanding of airline industry operations, the pilot profession, and safety.”
Senator Lindsey Graham, a sponsor of the effort, has noted that in 2007 the United States raised the mandatory retirement age from 60 to 65, and “the sky did not fall.” Transportation Secretary Pete Buttigieg has said he does not support raising the pilot retirement age.
The House bill would bar airlines from charging family seating fees but would not set minimum seat size requirements or impose new rules to compensate for delays. It would also mandate by 2030 an increase to the recording time of cockpit voice recorders from a two-hour loop to a proposed 25-hour loop, and require a cockpit video recorder.
Reporting by David Shepardson; Editing by David Gregorio
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, May 23 (Reuters) – What could happen on Main Street if Washington’s political showdown over the debt ceiling stopped the government from cutting checks that fund a quarter of the economy?
Americans could quickly notice painful blows dealt to their retirement accounts as stock markets swooned, and within days the lack of federal payments could weigh heavily on doctors’ offices, retirees and workplaces throughout the country.
HOW WOULD IT START?
If the U.S. Congress and the White House failed to lift the self-imposed $31.4 trillion legal limit on federal debt, the Treasury Department could start missing payments on its obligations as soon as June 1, according to the department’s chief, Janet Yellen.
At that point, Washington would be under severe pressure to keep making payments on U.S. bonds, which underpin the global financial system. Missing a payment would trigger a Wall Street meltdown of historic proportions. “It would be downright cataclysmic,” said Mark Zandi, an economist at Moody’s Analytics.
Even if the Treasury paid bondholders on time, as most observers expect it would try to, the political dysfunction driving the crisis would sow distrust in America’s economic prospects, and the value of most everything owned by Americans, from their homes to their retirement portfolios, would drop. “Stock prices would fall, commercial real estate values, house prices. Everything would fall,” Zandi said.
Interest rates would increase, making it harder to buy a home or car or borrow money to start a business.
Within days, the financial mayhem would be a principal force putting the economy on the path to recession, Zandi said.
COULD IT GET WORSE?
The mass layoffs that normally come with recession could be weeks away following a default. More immediately, hundreds of billions of dollars in federal spending could be withheld from the economy.
Doctors’ offices, hospitals and insurance companies could be among the first to get stiffed. On June 1, they are due about $47 billion in payments through Medicare, America’s public health insurance program for older Americans, according to the Bipartisan Policy Center, a think tank that estimates Washington’s day-to-day schedule of bills due.
Because Medicare funds about a fifth of U.S. healthcare, some doctors might not have money to pay staff and other bills. Hard decisions would have to be made on scheduling surgeries and other procedures without being able to pay for them. “The longer this goes on, the more disruptive it could be,” said Tricia Neuman, a health policy expert at the KFF research group.
WHO ELSE COULD TAKE A DIRECT HIT?
On June 2, about a quarter of the nation’s retirees could check their bank accounts and see that $25 billion in expected Social Security payments were not deposited.
Payments could also stop going out to government contractors, including $1 billion due to defense contractors on June 2. On June 9, $4 billion in salaries could go unpaid for parts of the 2-million-strong federal workforce and schools expecting $1 billion in federal funding could have to do without. Some payments could go out with significant delays.
People would keep one eye on their bank accounts for missed deposits and the other on Wall Street, where concerns over the nation’s creditworthiness could be savaging the value of people’s life savings.
“One is days of delays for their Social Security check, and the other is a 20% drop in their 401(k),” said Shai Akabas, the director of economic policy at the Bipartisan Policy Center.
Reporting by Jason Lange; Editing by Scott Malone and Stephen Coates
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WASHINGTON, March 1 (Reuters) – A Republican drive to prevent pension fund managers from considering factors like climate change in their investment decisions gained momentum on Wednesday, as a second U.S. Senate Democrat said he would support the measure in an afternoon vote.
Senator Jon Tester of Montana said he would join Republicans and fellow Senate Democrat Joe Manchin in backing a joint resolution to overturn a Biden administration rule that would make it easier for plan managers to consider so-called ESG factors.
Tester’s announcement appeared to give Republicans the simple majority they need to enact the resolution later on Wednesday and send it on to President Joe Biden, who is expected to veto it. Approval could open the door to other Republican efforts to overturn Biden administration regulations.
“We 100% have the votes,” a Senate Republican aide said after Tester released a statement.
The Democratic-led Senate was due to vote on the Republican resolution at 4 p.m. EST (2100 GMT). The same measure passed the Republican-controlled House by a largely party-line vote on Tuesday.
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“I’m opposing this Biden Administration rule because I believe it undermines retirement accounts for working Montanans and is wrong for my state,” Tester said in a statement.
Tester and Manchin both face reelection next year in states where Republicans have expanded their political control in recent years.
The resolution would block the Labor Department from enforcing a rule that makes it easier for plan managers to consider environmental, social and corporate governance issues in their investment decisions and when exercising shareholder rights, such as through proxy voting.
Republicans need only a simple majority in the chamber, which Democrats control 51-49. With Democratic support, Republicans are invoking the Congressional Review Act, a legislative tool that allows them to bypass the customary 60-vote threshold for passing most legislation.
The political battle marks the latest clash in a Republican war against what they decry as “woke” business practices that is likely to intensify as the 2024 presidential campaign gets under way.
Republicans claim the rule, which covers plans that collectively invest $12 trillion on behalf of 150 million Americans, would politicize investing by allowing plan managers to pursue liberal causes, which they say would hurt performance.
Senate Democratic leader Chuck Schumer accused Republicans of interfering with private investing decisions, saying on the Senate floor that they are “forcing their own views down the throats of every company and every investor.”
The regulation prohibits plan managers from subordinating financial interests to other objectives, according to a Harvard Law School analysis, which found it makes largely cosmetic changes to a more restrictive rule set in place under former President Donald Trump.
The Labor Department said the Trump-era rule failed to account for the positive impact that ESG investing can have on long-term returns. Industry has been split on the Biden rule, with fossil-fuel companies opposed and other businesses voicing support.
In 2022, ESG funds were hit by fallout from the Ukraine war, tumbling financial markets and U.S. political backlash against the industry. As a result, those funds lagged non-ESG funds for the first time in five years after fossil fuel shares – which they typically shun – soared.
Reporting by David Morgan; additional reporting by Daniel Wiessner in Albany, New York; editing by Andy Sullivan and Nick Zieminski
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BENGALURU, Dec 2 (Reuters) – A retreat in U.S. house prices will extend into next year, although the expected 12% peak-to-trough drop predicted by analysts polled by Reuters would be just about one-third as severe as the last market correction 15 years ago.
Such a modest fall after a 40% rise in average house prices over the last two years based in part on a surge in demand for more space during the COVID-19 pandemic will not be enough to make housing affordable, analysts said.
House prices have doubled in the last decade but a doubling in mortgage rates since the start of this year from 3.3% to around 6.5% has brought the historic boom to a screeching halt.
Average U.S. house prices as measured by the Case Shiller 20-City index are forecast to rise 13.6% this year and fall over 5.6% in 2023, the Nov. 8 – Dec. 2 poll of 25 housing strategists showed. If realized, it would be the first full-year decline in house prices in a decade.
Average U.S. house prices peaked in June on this measure and are already down about 4% since then. They are expected to drop 12% in total, according to the median forecast, with estimates ranging as high as 30%.
“The expensive prices of homes coupled with high mortgage rates have made housing unaffordable for many Americans,” said Crystal Sunbury, senior real estate analyst at RSM, a consulting firm.
“Market corrections are expected to continue into 2023, as housing gives back some of the steep gains that occurred over the pandemic.”
Sunbury expects an average 5% decline next year, roughly the same as the consensus view.
But house prices need to fall close to 20% peak to trough in order to make them affordable, according to the median reply to an additional question, with forecasts as high as 40%, roughly the correction in the run-up to the 2007-08 financial crisis.
A strong job market and tight supply was expected to prevent a crash. A majority of respondents, 14 of 24, say the chances of that happening were low or very low. Among the remaining 10, nine said high and one said very high.
Existing home sales, which have dipped for nine months in a row to a 4.4 million annualized pace in October from nearly 6.5 million at the start of the year, were expected to average around these current levels until Q3 of next year.
Single-family homebuilding and permits for future construction too have dropped to the lowest levels since June 2020.
“Home prices in 2023 will be somewhat protected by inventory constraints,” said Matthew Gardner at Windermere Real Estate.
“Many would-be home sellers will be reluctant to lose the historically low interest rate that they currently benefit from, and this will limit the national correction.”
Since most Americans take out fixed 30-year mortgages, the impact of higher interest rates are not felt immediately by home owners, thereby reducing foreclosure risks and an outright crash.
(For other stories from the Reuters quarterly housing market polls:)
Reporting by Hari Kishan; Polling by Milounee Purohit and Dhruvi Shah; Editing by Ross Finley and Philippa Fletcher
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