SEOUL (Reuters) -North Korean state news agency KCNA said on Friday it tested a new nuclear underwater attack drone under leader Kim Jong Un’s guidance this week, as a U.S. amphibious assault ship arrived in South Korea for joint drills.
The North’s state news agency also confirmed it fired cruise missiles during the weapon test and firing drill that took place from Tuesday to Thursday.
During the drill, the North Korean drone cruised underwater for over 59 hours and detonated in waters off its east coast on Thursday, the KCNA said. It did not elaborate on the drone’s nuclear capabilities.
The drone system is intended to make sneak attacks in enemy waters and destroy naval striker groups and major operational ports, the KCNA said.
“This nuclear underwater attack drone can be deployed at any coast and port or towed by a surface ship for operation,” the news agency said.
In a separate firing drill, North Korea also confirmed it fired four cruise missiles on Wednesday to practice carrying out tactical nuclear attack missions.
The missiles were tipped with a “test warhead simulating a nuclear warhead,” and flew 1,500 to 1,800 kilometres, it added.
The South Korean military has said North Korea fired four cruise missiles off its east coast on Wednesday.
The North said the latest weapon test and drills had no negative impact on security of the neighbouring countries.
US equities rose on Thursday as investors digested a spate of central bank interest rate rises that have come in spite of recent turbulence in the banking sector.
The blue-chip S&P 500 rose 0.3 per cent, lead higher by tech stocks, while the tech-heavy Nasdaq Composite gained 1 per cent. Trading in both indices were choppy on Thursday, alternating between small losses and gains.
Late on Wednesday the US Federal Reserve proceeded with the 0.25 percentage point interest rate increase markets expected, but signalled that its monetary tightening cycle may be nearing the end. Tech is typically an industry that is heavily dependent on borrowing, so tech stocks are sensitive to interest rates.
On Thursday, the Bank of England raised its benchmark interest rate by 0.25 percentage points, also anticipated by markets. The Swiss National Bank and Norway’s central bank also increased interest rates on Thursday.
European equities were mixed: The region-wide Stoxx 600 closed down 0.2 per cent and London’s FTSE 100 lost 0.9 per cent. However, Germany’s Dax was flat and the CAC 40 in Paris finished 0.1 per cent higher.
In its monetary policy statement on Wednesday, the Fed omitted its oft-repeated references to the need for “ongoing” rate rises. Swaps markets are pricing in no change at the next meeting in May, with an outside chance of one more increase.
“Balancing the Fed’s desire to keep its pressure on inflation, and the reality of tightening credit conditions and bank lending appetite, we think the Fed could still deliver one more 25bp hike in May,” said Tai Hui, chief market strategist for Asia-Pacific at JPMorgan Asset Management.
The US financial sector fell on Thursday, even as US Treasury secretary Janet Yellen said the US was “prepared to take additional actions if warranted” to ensure the safety of US bank deposits. The KBW bank index ended the day down 1.7 per cent. Shares in the San Francisco-based First Republic, which this week hired advisers to explore options including a sale, fell 6.2 per cent.
US Treasuries gained on Thursday, with the yield on the two-year note, which is closely linked to short-term interest rate expectations, down 0.14 percentage points at 3.8 per cent.
Sterling rose against the dollar to a peak of $1.23 after the BoE decision, its highest point since early February. The yield on two-year gilt contracts was down 0.21 percentage points at 3.25 per cent. The yield on the 10-year note was down 0.09 percentage points to 3.35 per cent.
The central bank has been left balancing higher rates with the looming credit crunch resulting from the worst bout of banking turmoil since the financial crisis of 2008. The Fed said the US banking system was “sound and resilient”, but added that it was not yet clear to what degree the tighter credit conditions likely to stem from the collapse of Silicon Valley bank and Signature Bank would restrict the economy and inflation.
The global banking system has been rocked by the collapse of Silicon Valley Bank, Signature Bank and the last-minute rescue of Credit Suisse by UBS. Check out the latest analysis and commentary here
The Federal Reserve is getting some unwanted help in its drive to slow the U.S. economy and defeat the worst bout of inflation in four decades: A cutback in bank lending.
The upheaval in the financial system that’s followed the collapse of two major U.S. banks is raising the likelihood that lending standards will become sharply more restrictive. Fewer loans would mean less spending by consumers and businesses. That, in turn, would make it harder for companies to raise prices, thereby reducing inflationary pressures.
At the same time, some economists worry that the slowdown might prove so severe as to send the economy sliding into a painful recession.
On Wednesday, the Fed raised its benchmark interest rate for the ninth time in just over a year. The central bank’s policymakers are struggling with a persistently high inflation rate that has bedeviled American households and heightened the uncertainties overhanging the economy. At roughly 6%, U.S. inflation remains well below last year’s peak yet is still far above the Fed’s 2% annual target.
But the Fed also signaled that it might be nearing the end of its rate hikes. In part, that is because a decline in bank lending could help the central bank achieve its overarching goal of slowing the economy and taming inflation.
Speaking at a news conference Wednesday after the Fed’s announcement, Chair Jerome Powell suggested that stricter lending standards, resulting in a pullback in loans, could have the same slowing effect on inflation that a Fed hike can.
“It doesn’t all have to come from rate hikes,” Powell said. “It can come from tighter credit conditions.”
Similarly, after the European Central Bank raised its own benchmark rate by a substantial half percentage point last week, its president, Christine Lagarde, said the ECB was not locking itself into a preset plan for rate hikes and that future rate decisions would be made on a meeting-to-meeting basis.
Anxieties surrounding the European banking system “might have an impact on demand and might actually do some of the work that might otherwise be done by monetary policy,” Lagarde said just days after two major U.S. banks collapsed and the Swiss banking giant Credit Suisse required a rescue by its rival UBS.
Indeed, if Europe were to experience a credit crunch, analysts say, last week’s ECB rate hike might be its last for a while.
ECB officials have said their banks are “resilient” and have strong enough capital buffers and cash to cover whatever deposit withdrawals they face. European supervisors have applied international standards, requiring more ready cash on hand. By contrast, U.S. regulators exempted all but the very largest U.S. banks. Silicon Valley was one of those banks.
And when loans are more expensive and harder to qualify for, consumers, who drive most of the U.S. economy’s growth, are less likely to spend.
Gregory Daco, chief economist at the consulting firm EY-Parthenon, said he thinks a significant credit squeeze would have “slightly more’’ of an economic impact than the quarter-point rate hike the Fed announced Wednesday.
Edward Yardeni, an independent economist, said he would estimate that the impact would be even larger — the equivalent of a full percentage point hike by the Fed.
Inflation could slow as a result, helping the central bank accomplish its long-standing goal. But the the toll on economic growth could be substantial, too. Most economists have said they expect a recession to occur in the United States by the second half of this year. The main question is how severe it might be.
Signs of a possible credit crunch in the United States had begun to emerge even before Silicon Valley Bank collapsed on March 10, raising worries about the stability of the financial system. In the face of rising rates and a deteriorating economic outlook, banks were already becoming stingier about approving loans to businesses at the end of 2022, according to a Fed survey of bank lending officers.
And bank “commercial and industrial’’ loans to businesses dropped last month for the first time since September 2021, according to the Fed.
Since then, the stress on banks has only grown. Silicon Valley Bank, which had been the nation’s 16th biggest bank, failed after accumulating huge losses on its bond portfolio that led worried depositors to withdraw their money. Two days later, regulators shut down New York-based Signature Bank.
The Federal Deposit Insurance Corporation, which insures bank deposits up to $250,000, said that banks were sitting on $620 billion of paper losses in their investment portfolios at the end of last year. That was largely because higher interest rates had sharply reduced the value of their holdings in the bond market.
Powell declared Wednesday that the banking system is “sound’’ and “resilient.” Yet fear remains that more depositors will pull their money out of all but the biggest American banks, intensifying pressure on financial institutions to lend less and conserve cash to meet withdrawals.
Banks with less than $250 billion in assets account for about half of all business and consumer lending and two-thirds of home mortgages, noted Mark Zandi, chief economist at Moody’s Analytics.
“Credit is really the grease that oils the U.S. economy and allows it to function and grow at a stable pace,’’ Daco said. “Without credit — or with slower credit growth — we’re likely to see businesses be more hesitant when it comes to investment decisions, when it comes to hiring decisions.”
A tightening of bank credit, he said, “noticeably increases the risk of a recession.’’
A group of Ghana’s independent power producers has rejected a proposal from the government to include $1.4 billion in arrears as part of the nation’s external debt restructure, while pushing authorities to honor payments that start coming due Friday.
(Bloomberg) — A group of Ghana’s independent power producers has rejected a proposal from the government to include $1.4 billion in arrears as part of the nation’s external debt restructure, while pushing authorities to honor payments that start coming due Friday.
The Independent Power Generators of Ghana — an umbrella association known as IPP, which represents eight foreign and one local power suppliers — is asking the government to meet the payment it owes to six of its members, or face the possible shutdown of power plants, Elikplim Apetorgbor, the group’s chief executive officer, said in an interview Wednesday in Accra. The money, he said, is needed to service bank loans and pay input suppliers.
“Our members reject any notion of restructuring their arrears or claims as part of the ongoing or any future debt restructuring program,” Apetorgbor said. “Our members are accruing associated penalties on huge arrears with suppliers and some are in default of their loans service with banks since the start of March. Clearly this is not sustainable.”
The companies owed are Aksa Energy, Amandi Energy, Karpowership Ghana, Sunon Asogli, Cenpower Generation and Cenit Energy. Together with Meienergy and Trojan Power, these suppliers provide 2,154 megawatts of the nation’s peak demand of 3,558 megawatts, according to the association. A ninth member, Early Power, is yet to connect its 400-megawatt plant to the national grid.
The group has been at odds with the government since Minister of Finance Ken Ofori-Atta first communicated his intention to restructure the independent producers’ receivables in a Feb. 13 letter, Apetorgbor said. The association followed with a response earlier this month, objecting to the plan.
A spokesperson for the finance ministry couldn’t immediately respond.
Ghana owes the power debts through its state-owned energy distributor Electricity Co. of Ghana. The company struggles to pay producers on time because it loses about $580 million of its revenue annually to transmission leakages, illegal connections and unpaid bills, according to the Ministry of Energy.
The West African nation is restructuring most of its public debt, which stood at about 575.7 billion cedis ($47 billion) by the end of November, to qualify for a $3 billion financial aid package from the International Monetary Fund.
As part of the broad restructuring, the government has proposed to treat independent power suppliers’ receivables as external debt, together with bilateral obligations, eurobond and commercial term-loan components of the 382.7 billion cedis of foreign debt. Creditors face a haircut of as much as 50%, according to S&P Global Ratings.
“Our association is prepared to engage with government on a sustainable payment schedule with regard to the arrears,” Apetorgbor said. “Restructuring is an option that cannot be negotiated because it will basically spell doom for our plants.”
Ford (F) shares rose in early trading as the company gave a presentation on how it will reorganize its business units and report financial performance, though the company expects $3 billion loss for its EV unit this year.
Dubbed a “refounded” Ford, the company stated that it will report results using the business segments Ford Blue (gas, hybrid vehicles), Ford Model e (EVs) and Ford Pro (commercial products & services), and not by regional markets like in the past.
Ford recasted prior financial results in order to show how the accounting will work— 2022’s results will be recast by quarter, and 2021’s results will be broken down into the full-year’s performance.
For example, Ford revealed that for the entire year of 2022, under the new segmentation Ford disclosed that the Model e EV segment lost $2.1 billion in adjusted EBIT last year, whereas Ford Blue made $6.8 billion, and Ford Pro made $3.2 billion in adjusted EBIT. Under the old segmentation, Ford only broke out performance by regional segment, and there was no transparency into how the separate segments operated.
Though Wall Street applauded Ford’s decision to break out reporting and reorganize the company, the bigger concern now will be whether Ford can show the EV segment is growing over time, and on the way to profitability.
To that end, Ford announced a number of new financial targets, including:
Reaffirmed full-year adjusted EBIT of $9 billion to $11 billion – and adjusted free cash flow of about $6 billion (Ford says it will have more on this at its Capital Markets Day in May)
Reaffirmed 10% margin target for company adjusted EBIT (earnings before interest and taxes) by the end of 2026
New 2023 segment-level EBIT expectations:
a full-year loss of about $3 billion for Ford Model e;
about $7 billion for Ford Blue
About $6 billion for Ford Pro
Ford expects Ford Model e to approach break-even status (by a revenue minus certain variable cost basis) by the end of this year, but that will be “more than offset on an EBIT basis by higher investments in new EV products and manufacturing capacity”
Repeat its 8% EBIT margin objective by late 2026 for Ford Model e, “which is tied to planned global electric vehicle production run rates of 600,000 units by the end of 2023 and two million by the end of 2026”
When asked about the losses expected in the Model e business, Lawler said that Ford is “investing in growth,” and that means long-term investments in new vehicles and plants will weigh on Ford Model e profitability next year. Lawler said growing manufacturing scale, insourcing of parts, and improving battery technology and simplifying platforms will eventually lead to profitability, and achieving that 8% EBIT margin target.
Ford also explained how assets are assigned and revenue and costs are reported across the segments, and described accounting for products supplied between segments. Ford uses the example of a Ford F-150 Lightning EV built at a Ford Blue plant in Michigan, that will incur costs that will then flow to the business unit that sells the Lightning, either Ford Model e or Ford Pro for commercial customers. Ford Model e or Ford Pro would then recognize the revenue from the sale, balancing out the transaction.
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Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.
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