Business

By Julie Chabanas
Agence France-Presse

WASHINGTON — Mortgage rates are finally ticking up in the United States, one year after the Federal Reserve cut its lending rate, a step taken to boost the economy as the COVID-19 pandemic arrived, but that is not expected to cool the hot housing market.

While the wider US economy has struggled after states restricted business to stop COVID-19, real estate was one of the few bright spots in 2020, boosted both by low mortgage rates and the shift towards remote work caused by the pandemic.

"We've seen mortgage rates move higher in the past month or so," Joel Kan of the Mortgage Bankers Association indicated.

The housing market is a key part of the world's largest economy, and mortgage rates are closely watched to gauge the ease with which Americans can buy property.

They are tied into the wider US Treasury bond market, where yields have been rising in recent weeks as traders fear that the economy's improving health could bring inflation with it.

Rates on 30-year mortgages are now ticking up and expected to hit 3.5 per cent by the end of the year, after dropping in July below three per cent, a low not reached before.

"In that sense, it is bad news for buyers, because now they are facing higher interest rates, higher monthly payments," said Lawrence Yun, chief economist at the National Association of Realtors.

'Incredibly low' rates 

Mortgage rates have hovered around four per cent for the past decade, but US homebuyers have seen much higher borrowing costs in the past.

Rates were around eight per cent in the early 2000s, and hit their record high of more than 18 per cent in the early 1980s, according to government-sponsored lender Freddie Mac.

Despite the recent uptick in rates, Yun says they remain "incredibly low," and predicts better economic growth that puts more money into Americans' pockets will help them overcome the increased borrowing costs and push real estate sales up 15 per cent this year.

Even with the expectation that offices will reopen as COVID-19 vaccinations become widespread, some employees could continue working remotely and look for new houses that accommodate that — a dynamic viewed as already boosting sales last year.

Kan said the market is "still looking pretty strong", and noted mortgage costs are only once component of the decisions that go into home buying, along with finding a property the buyer likes.

Supply squeeze

Yet, as more buyers have closed on homes across the United States, supply has grown short, pushing prices up and sending developers scrambling.

Sales of existing homes were up 5.6 per cent last year from 2019, their highest level since the booming housing market of 2006, just before the housing bubble burst and 2008-2010 global financial crisis began.

New homes have also seen brisk sales, pushing prices up from an average of $384,000 in January 2020 to $408,800 in January of this year, a gain of 6.5 per cent, according to the Commerce Department.

Rubeela Farooqi of High Frequency Economics predicted "record-low inventories are likely to support to building activity, especially in the single-family sector."

However, Chuck Fowke, president of the National Association of Home Builders, warned that increases in both interest rates and costs of lumber and other materials have already caused builders to slow some construction of single-family homes.

MILAN — Italian energy giant Eni said on Thursday it had filed a request with a Milan court to pay 14 million dollars (11.8 million euros) to settle an investigation into corruption in Congo-Brazzaville levied at the company and one of its managers. 

According to Italian media, the probe was first launched in 2017, and relates to payment of suspected bribes when oil licences in Congo-Brazzaville were being renewed in 2015.

To secure renewal, Eni was accused of agreeing to sell parts of its licence to a shell corporation maintained by Congolese public officials. 

In a statement, Eni said the request was not an admission of guilt, "but an initiative aimed at avoiding the continuation [of] a judicial process that would entail further expenditure of resources from Eni and all the involved parties".

The court reducing the alleged offence from international corruption to undue inducement had paved the way for a settlement, the company explained. 

Eni refused to divulge the name of the manager implicated. 

The news comes the day after an Italian court cleared Eni and Shell of charges related to a major oil exploration deal in Nigeria in which $1.1 billion allegedly ended up in the pockets of corrupt politicians and middlemen.

Among the 13 individual defendants was Eni's chief executive, Claudio Descalzi, for whom prosecutors sought an eight-year prison term.

Descalzi was targeted by another investigation by a Milan court in 2019, accused of not disclosing a potential conflict of interest regarding Eni's activities in Congo-Brazzaville, allegations dismissed by the company as "without any foundation". 

SAO PAULO — Brazilian aircraft-manufacturer Embraer said on Friday it cut its losses to $3.3 million in the fourth quarter, but ended pandemic-hit 2020 with a total net loss of $731.9 million, more than double the previous year.

Embraer, the world's third-biggest plane-maker, after Airbus and Boeing, has been gradually recovering from the devastation that COVID-19 restrictions wrought on the aviation industry last year, but its future remains murky.

It said it had opted not to release guidance on expected financial results or plane deliveries for 2021, "due to continued uncertainty related to the COVID-19 pandemic and its impacts on the industry”.

Still, things are looking better for the company than when it first suspended its guidance a year ago.

Its net loss of $3.3 million for the last three months of the year was an improvement on both the $209.8 million it lost in the same period in 2019 and its loss of $121.2 million in the third quarter of 2020.

The full-year result was more than double its net loss of $322.3 million for 2019.

"The company's aircraft deliveries in 2020 were negatively impacted principally by the COVID-19 pandemic that continues to affect the world, especially commercial air travel," Embraer said in a statement.

"Annual commercial jet deliveries [44] declined 51 per cent in 2020 as compared to the 89 jet deliveries the company registered in 2019," it said.

"Executive jet deliveries [86] were less impacted, falling 21 per cent relative to the 2019 deliveries of 109 jets."

Exacerbating its difficult 2020, Embraer suffered a break-up in April with troubled US aerospace giant Boeing, which announced it was abandoning plans for a $4.2-billion deal to buy the Brazilian company's commercial plane division.

However, in a sign of the recent uptick for Embraer, more than half its deliveries last year were in the fourth quarter — 71 out of a total of 130.

WASHINGTON — Google will invest more than $7 billion in the United States this year and create thousands of jobs, the tech giant's CEO said on Thursday.

"We plan to invest over $7 billion in offices and data centers across the US and create at least 10,000 new full-time Google jobs in the US this year," Sundar Pichai said in a statement.

Pichai said Google "wants to be a part" of America's economic recovery from the pandemic and is investing in some communities that are new to the company, as well as expanding in others across 19 states.

The announcement comes as Google faces pressure from dozens of US states that accuse the internet giant of abusing its search dominance to eliminate competition.

Google will spend $1 billion in its home state of California.

Outside of the San Fransisco Bay Area, Google said it would add thousands of jobs in Atlanta, Washington DC, Chicago and New York.

"This will help bring more jobs and investment to diverse communities as part of our previously announced racial equity commitments," Pichai said.

Google's parent company Alphabet last month reported a 50-per cent jump in quarterly profit to $15.2 billion as its digital ad business thrived.

LONDON — Andrew Bailey took over as governor of the Bank of England last year, just as Covid hit Britain like a storm, sinking the economy to uncharted depths.

The economy shrank by 9.9 per cent last year due to the effect of the global health crisis -- the biggest contraction on record.

But if that was not enough to deal with, Bailey's first 12 months in office has seen him come under repeated scrutiny about his past role as head of the country's securities regulator.

The coronavirus pandemic gave Bailey, 61, from Leicester, central England, no time to settle in.

"It was the third day of my term when the markets team came into the office and said, 'we need to talk'. That's never good," he told the Financial Times last May. 

Under his leadership, the bank lowered its key interest rates to an all-time low and increased its asset-purchase programme to prevent the economy from going under.

A year on, the overall picture looks markedly different.

Some 25 million people -- or half of all the country's adult population -- has received a first dose of a vaccine and there are tentative moves towards easing lockdown restrictions.

The economic situation, too, appears to be improving.

But 2021 could yet be as eventful for Bailey, as a series of scandals during his career in the City rear their heads.

Scandals 

Bailey, a more subdued figure to his charismatic predecessor Mark Carney, earned a doctorate at Cambridge University before becoming a researcher at the London School of Economics, where his wife Cheryl Schonhardt-Bailey teaches political science.

He joined Britain's central bank in 1985, and has spent most of his working life on Threadneedle Street.

The bespectacled father-of-two played a key role during the 2008 financial crisis, when he was in charge of the bank's special operations that oversaw the publicly-funded rescue of the Royal Bank of Scotland.

In 2016, he left the institution to join the Financial Conduct Authority (FCA) watchdog after being headhunted.

He has admitted the job was tough, although he had no regrets about taking up the position.

Under his tenure, the FCA was rocked by a series of scandals, including the collapse of former star investor Neil Woodford's fund and London Capital and Finance.

The fall of LCF, which cost thousands of investors their life savings, continues to dog the governor to this day.

Judge Elizabeth Gloster, who is conducting an inquiry into the FCA's responsibility for the collapse, has accused Bailey of pressuring her not to include his name in her report.

He has denied the allegation. But he has had to repeatedly defend his record.

Brexit 

Bailey also differs from his Canadian predecessor Carney on Brexit, Britain's divisive departure from the European Union last year.

While "leave" supporters accused Carney of being too pessimistic in his forecasts of the financial implications of leaving the bloc, Bailey has shown himself ready to defend the City at all costs.

The financial sector was virtually ignored in the last-gasp trade agreement secured in late December.

The EU is concerned that much of its financial activity will be channeled through London, which it no longer regulates.

But Bailey said he was prepared to "resist vigorously" to keep euro-clearing houses in Britain.

He has said it would be "unrealistic, dangerous and inconsistent with practice" to agree to never change UK financial regulation because of market changes and unforeseen risks.

But forcing Britain to march in lock-step with future EU regulations was "rule-taking, pure and simple", and failed to account for the outsized share of UK finance in the global economy.

He argues instead for an acceptance of healthy competition between London and the EU.

"I believe we have a very bright future competing in global financial markets underpinned by strong and effective common global regulatory standards," he added.

LONDON — World stock markets rose on Thursday on an upbeat outlook from the US Federal Reserve, with the focus now on the Bank of England's upcoming interest rate decision.

Frankfurt jumped 1.2 per cent to hit a fresh record, with sentiment boosted partly by the flotation of Vantage Towers, the German phone masts unit of British telecoms giant Vodafone.

Paris gained 0.2 per cent and London firmed 0.1 per cent before the Bank of England is expected to leave interest rates at a record low 0.1 per cent.

'Supportive' Fed stance 

"The Fed-inspired upbeat mood has broadly transferred to Europe," said OANDA analyst Sophie Griffiths. 

"The Dax is a clear outperformer, powering to a fresh all-time high. Cyclical stocks -- those closely tied to the economy's performance, such as automobiles, banks, miners and travel and leisure -- are leading the gains."

She cautioned however that traders were also weighing up "the Fed's supportive stance against concerns over the covid vaccination programme in Europe".

Asian equities rose after the Fed ramped up its outlook for the US economy and reiterated its pledge to maintain its ultra-loose market-friendly monetary policies for as long as needed.

With growth already expected to burst higher this year, huge stimulus spending kicking in and vaccines being rolled out, investors have in recent weeks grown worried about a surge in inflation that could force the US central bank to reconsider its dovish stance.

But the Fed's decision after its latest board meeting was music to the ears of traders.

Policymakers forecast the world's top economy to expand 6.5 per cent this year, a full two percentage points above their earlier projection.

The upward revision was thanks to trillions of dollars in government spending and the expected easing of lockdown measures that will allow people to get back to their daily lives.

'No hurry to raise rates' 

The Fed continued to pledge that the record low interest rates that have been a key pillar of the year-long markets rally will not be touched for the foreseeable future.

Investors were cheered by projections that borrowing costs will likely stay where they are until possibly 2024, even if inflation surges.

"The overarching message... was of greater optimism on the outlook but a central bank that is not in a hurry to raise rates," said Axi strategist Stephen Innes. 

Wall Street rallied on the news, with the Dow ending above 33,000 for the first time, while the S&P 500 also chalked up a record. 

PARIS — The coronavirus pandemic initially brought the global economy to a halt but business adjusted, with the more nimble taking advantage of the move online while others struggle to find a way forward.

Here are some of the economic winners and losers of the COVID era so far:

Amazon, online champion 

Lockdowns, curfews and travel restrictions all seemed to play to the strengths of Amazon, which pioneered the transition to online retail.

The company headed by Jeff Bezos, who started out selling books and losing massive amounts of money, seemed perfectly suited to the changed times as bored and anxious consumers confined to their homes stocked up.

The results were stunning — a 40 per cent increase in sales to $387 billion dollars last year.

Food delivery 

The home food delivery business also came of age as people dined-in instead of out, with restaurants and bars either restricted or closed completely.

Anglo-Dutch group Just Eat Takeaway saw its revenues soar 54 per cent to 2.4 billion euros while British competitor Deliveroo jumped 64 per cent to 4.1 billion pounds.

Entertainment 

What else is there to do if one cannot go out except slump on the sofa to watch television and play video games while munching on your latest dine-in delight?

With the cinema out of bounds, the home-based version took off big time, with Netflix building an audience of 200 million on an offer of high-class films and series typified by "The Crown", the story of Britain's Queen Elizabeth II.

Disney, not to be left behind, launched its Disney+ service late 2019 and had 95 million subscribers by early 2021.

Among the game makers, Sony and Microsoft launched new consoles and ramped up sales.

Families also played more classic games, with Danish toy brick maker Lego enjoying a new lease of life in helping keep children — and adults — amused and busy for long periods of time.

The family-owned business chalked up a 19 per cent rise in net profit to a record 1.3 billion euros last year.

Airlines, tourism ache 

Air transport was probably the worst hit sector, with thousands of aircraft mothballed worldwide.

Predictions for a return to a semblance of normality have progressively been put back, with industry groups now looking to 2023 or even 2024.

Legacy flag carriers such as Air France and Lufthansa chalked up huge losses — of 7.1 billion euros and 6.7 billion euros respectively — and required huge state bailouts to keep them going.

The low-cost operators such as EasyJet and Ryanair adapted faster than their older peers but could not escape the impact of the near total collapse of air travel.

Ryanair's Michael O'Leary lambasted governments for bailing out the older carriers he believes do not deserve to be in business and he insisted the crisis was also an opportunity to finally restructure the industry.

According to the International Air Travel Association, airlines lost some $118 billion last year and while there is great hope vaccination programmes will make a difference this year, losses are still expected at $38 billion.

Oil majors 

suffer, recover 

With the global economy stalled in the second quarter last year at the height of the first pandemic wave, oil prices fell off a cliff, even turning negative at one point.

But production cuts, supported by non-OPEC producers such as Russia, slowly helped steady the market and prices began to rise on hopes for a strong economic recovery this year.

That was not enough however to stop the five majors — BP, Chevron, ExxonMobil, Shell and Total — from chalking up combined 2020 losses of $77 billion.

Oil prices so far this year have been well supported, flirting with $70 a barrel in recent trade on the hope massive stimulus packages, especially in the US, will support demand.

LONDON — Stocks mostly drifted lower on Wednesday as global traders cautiously awaited the outcome of the US Federal Reserve's (Fed’s) policy meeting for any comment on the inflation outlook.

The dollar was mixed as the US central bank wraps up a two-day policy meeting.

Fed chair Jerome Powell may use his news conference later on Wednesday to allay market worries about a possible surge in prices as the economy recovers.

With market attention focused on the US central bank, "investors are treading water ahead of a delicately poised Federal Reserve announcement", noted Richard Hunter, head of markets at Interactive Investor.

"Its previous assertion that the current inflation effect is transitory will need to be reiterated in order to avoid further uncertainty in the bond markets while for equities, any hint of a rise in interest rates earlier than expected would be unsettling."

US benchmark 10-year Treasury yields — a guide to future interest rates — have risen to a one-year high in recent weeks, with anxiety about higher inflation further stirred by Washington's $1.9 trillion stimulus package.

On Wall Street, the Dow began trading nearly unchanged, while the S&P 500 shed 0.4 per cent and the tech-heavy gave up 1 per cent as Treasury yields climbed further.

Analysts at Charles Schwab brokerage said investors are "fence-sitting ahead of this afternoon's monetary policy decision from the Federal Reserve".

In European trading, Frankfurt was flat, while Paris dipped 0.1 per cent. London shed 0.6 per cent.

Traders said there were continuing concerns over AstraZeneca's COVID vaccine shot which many EU countries have suspended pending results of a probe into several blood clot incidents.

In a newspaper article on Wednesday, the UK's health minister said the jab was safe and there was no evidence of a health risk.

Meanwhile, oil prices dropped by around 1 per cent after recent strong gains.

Oil markets and the world economy are recovering from the massive collapse in demand caused by the coronavirus pandemic, the International Energy Agency said in a report on Wednesday.