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China Evergrande Investors Relax Despite Default Deadline

China Evergrande Investors Relax Despite Default Deadline

HONG KONG — For months, as a troubled property company called China Evergrande spooked global markets with its financial problems, Beijing sat on the sidelines.

Now, the government is taking a more hands-on role.

Evergrande, the world’s most indebted property developer, said officials from several state-backed institutions had joined a risk committee that would help the company restructure itself. The committee, led by Evergrande’s founder, Xu Jiayin, will “play an important role in mitigating and eliminating future risks,” the company said in a filing late on Monday.

The formation of a committee with an apparent government imprimatur reassured investors who had worried about the potential impact, in China and beyond, of a chaotic Evergrande collapse. Its huge real estate empire includes millions of apartments in hundreds of Chinese cities, but Evergrande also has more than $300 billion in obligations it needs to pay back — and perhaps even more off the books.

“It looks like the government will intervene in some way to avoid a large crisis,” said George Yu, an economist at Renmin University in Beijing. “But the whole society should learn a lesson from this incident.”

Evergrande appeared to have missed payments to some of its bondholders of an affiliated company, Scenery Journey, that had been due on Monday. But its shares rose in Hong Kong trading on Tuesday as investors reacted to news of official backing for the company and broader measures to support an ailing property sector. Investors were also cheered by the Chinese government’s loosening of lending restrictions on Monday amid signs of broader economic slowdown.

Like other conglomerates before it that borrowed until they could no longer pay their bills, Evergrande will now be advised, in part, by officials from Guangdong, the province where the company first began selling apartments to a fledgling Chinese middle class in the late 1990s.

Evergrande said last week that it might no longer be able to meet its financial obligations. The disclosure was made against the backdrop of a worsening property market and tough operating conditions for developers. At least 11 developers have defaulted on their bond payments this year.

Investors worried that Evergrande might be next. The grace period for payments on two of its bonds, worth more than a combined $82 million, expired on Monday. If bondholders were not made whole, it would mark the beginning of a formal default, something the company has managed to narrowly avert for several months. Some bondholders had yet to receive any payment on the bonds on Tuesday, a person familiar with the matter said.

Evergrande did not respond to a request for comment.

Another distressed property giant, the Kaisa Group, faced a potential default on Tuesday. Bondholders sent it a proposal that would give it more time, according to Bloomberg.

On Wednesday, the company halted trading in its shares in Hong Kong pending new disclosures. It wasn’t clear when Kaisa might release additional information. The company’s shares had already lost three-quarters of their value over the past year.

Kaisa did not respond to requests for comment.

The authorities have been trying to rein in the reckless borrowing of corporate giants by pledging not to step in to save companies that can no longer pay their bills. Last year, officials turned their focus to property developers, among some of China Inc.’s biggest borrowers.

The central bank began by restricting bank lending to real estate companies and making access to new cash contingent on the ability of companies to start paying off their debts. With their traditional channels of financing drying up, and facing pressure from authorities to get their debt levels down, many developers found themselves in a tight spot. A slowing property market has made things worse and put strain on the entire sector.

In recent weeks, defaults in the property market have set off panic in the bond market, raising the cost of borrowing to record highs. Many developers have struggled to keep their operations running, to complete work on apartments they have sold and to pay their employees and contractors. China Central Television, the state-owned broadcaster, reported on Monday that Kaisa had failed to pay some of its workers for months and was having trouble finishing a luxury project in Guangzhou that was supposed to be delivered last year.

Evergrande’s call for help last week prompted a flurry of comments from China’s regulators assuring the market that its financial problems would not spill over into the broader economy. The Communist Party’s Politburo also weighed in to say the government would help support the property market.

Evergrande’s new risk committee will include top officials from China Cinda Asset Management, Guangdong Holdings, Guangzhou Yuexiu Holding and Guosen Securities — entities that are either owned or backed by the state. Evergrande said on Friday that it planned to “actively engage” with its foreign creditors.

One question now is whether investors in Evergrande’s U.S. dollar bonds will be willing to consider cutting a quick deal to roll over the company’s roughly $20 billion in unpaid bonds before the restructuring begins, or if they will chose to wait until the rest of the company’s more than $300 billion in debts are resolved.

The Chinese authorities have made clear that social stability is crucial, indicating that they may put priority on the home buyers, suppliers and contractors still awaiting payment from Evergrande. And the company is on the hook for some 1.6 million uncompleted apartments that buyers have already paid for.

But officials advising the developer may also be concerned about how foreign investors are treated in the restructuring process, said Han Shen Lin, an assistant professor of practice in finance at New York University Shanghai. Developers have become heavily dependent on access to international markets for funding. Over the next few months, they will need to make payments totaling $17 billion, according to one estimate.

“While addressing social downside is a priority,” Mr. Lin said, “how the offshore U.S. dollar debt investors are treated will be an important signal of future China risk pricing.”

Keith Bradsher contributed reporting from Beijing.

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25 years in the schools, Part 1

25 years in the schools, Part 1

This fall semester is the beginning of my 25th school year in middle schools, high schools and colleges making financial literacy presentations. Regular readers know that I frequently make, and often refer to, these CARE presentations. In fact, in the school year before the pandemic shutdowns, I made over 250 presentations in 56 different schools.

What I want to do in this two-part series is set out a history of my work in financial literacy, and then talk about my recent experiences at Canandaigua Academy with the students in Tammy Franz’s Career and Financial Management first-semester classes, as well as some of my past experiences both there and with Kimberly Connal in the Middle School.

25 years in the schools, Part 1

It all started in 1997, five years after I was sworn in as a Federal Bankruptcy Judge for the Western District of New York. Although I sat in Rochester, my jurisdiction included Canandaigua and all of Monroe and Ontario counties. In those five years, I found myself every day dealing with individual debtors. It was something that I had not done much of in my 18-year commercial practice before taking the bench, during which I represented 11 different banks at one time or another.

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Expectations for faster pullback in Fed support takes steam out of credit

Expectations for faster pullback in Fed support takes steam out of credit

Corporations are rushing to issue more debt amid the Federal Reserve’s messaging that it may move quicker to tighten the spigot on its easy money policies.

Despite the emergence of the Omicron variant, Fed Chairman Jerome Powell and a chorus of other Fed officials recently signaled they were likely to support a faster wind-down in the Fed’s asset purchase program.

If the Fed can fully end the so-called quantitative easing program early next year, the central bank would have the flexibility to start raising interest rates earlier than the timeline previously set in early November.

The prospects of earlier — and perhaps more aggressive — interest rate hikes are pushing companies to pull forward issuance of corporate bonds. Lower Fed rates generally correspond to cheaper borrowing costs. And messaging that the Fed may move faster appears to have spooked issuers into pulling forward bond issuance ahead of any rate hikes.

BofA Securities noted that the supply of investment-grade corporate debt jumped to $57 billion in the week ended Nov. 15, as chatter over an accelerated taper began building.

“For companies thinking about their own situation and taking an upper hand knowing interest rates are low now, spreads are tight now, and markets are wide open now: go ahead and issue the bonds when you can,” said Tom Graff, head of fixed income at Brown Advisory.

Warning signs have flashed in credit markets as early as October. In that month, BofA Securities observed a slowdown in inflows into U.S. investment-grade funds and ETFs, coinciding with a 10-year U.S. Treasury yield that was trending higher.

Emily Roland, co-chief investment strategist at John Hancock Investment Management, said adding some high-yield bonds might be an attractive opportunity. But she said to stay away from junkier bonds at the bottom of the rating spectrum.

“It’s going to be hard to sort of squeeze more out of the lower rungs of the high-yield bond market and we would really think about those BBs, those fallen angels that continue to have the ability to be upgraded as this economic cycle unfolds,” Roland told Yahoo Finance Tuesday.

Still, uncertainty looms over the asset class.

Corporate bond spreads widened in November amid heavy supply and lower demand, sparking concerns that more volatility in spreads could be coming in 2022. But investment-grade spreads still remain historically low (104 basis points now, comparable to pre-pandemic levels).

BofA Securities pointed out that the emergence of Omicron shook equity markets but made little waves in spreads, reinforcing their analysts’ views that the “number 1 risk” for spreads remains “a more hawkish Fed.”

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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Despite Weak Job Growth, a Fourth Payment Seems Unlikely

Despite Weak Job Growth, a Fourth Payment Seems Unlikely

Though job growth didn’t improve as much as economists would’ve liked in November, it’s still hard to make the case for another direct payment.

It’s been many months since stimulus checks have hit Americans’ bank accounts, as the last round to go out was approved back in March. And that’s something a lot of people aren’t happy about.

With inflation driving the cost of everyday goods and services up, many Americans are desperate for a windfall. This especially holds true for those earning minimal wages at their jobs, or whose finances have yet to recover from the early impact of the pandemic.

But while inflation may be causing a financial crunch for a lot of people, that alone is unlikely to be a driver of stimulus aid. A bigger measure is the extent to which jobs are or aren’t available. And in that regard, those wanting another stimulus check don’t have much of a leg to stand on at this point.

Joblessness has reached a pandemic low

In November, the national unemployment rate fell to 4.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, down from 4.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} a month earlier. That’s the lowest level of unemployment on record since March of 2020, when the pandemic first hit U.S. soil.

Now despite plunging jobless rates, there was some disappointing news for the economy in November. Nonfarm jobs only increased by 210,000. That’s well below the 573,000 new jobs economists were expecting, and it’s way shy of the 546,000 new jobs that were added to the economy the previous month.

But still, even with job growth coming in at disappointing levels in November, it’s difficult to make the case for additional stimulus aid. Not only are jobs available in today’s economy, but many industries are actually grappling with labor shortages. And to address them, they’re throwing higher wages and other benefits at potential candidates in an effort to get them to sign on board.

Making up for a lack of aid

While the unemployment picture has improved since the start of the pandemic, many individual households may still be struggling to find their financial footing. Those who are still having a difficult time making ends meet may want to consider boosting their income with a second job, what with work being more available and employers being desperate enough to agree to more flexibility. Unfortunately, the age-old advice of “cut back on spending” doesn’t really work in today’s environment, what with the cost of basics having risen so drastically over the past few months.

Meanwhile, the supply chain issues that have led to rampant inflation aren’t about to resolve themselves anytime soon. In fact, things could get worse before they get better, especially with the emergence of the recently reported omicron variant of COVID-19.

President Biden has made it clear that he doesn’t want to resort to the lockdown measures that were implemented early on in the pandemic. But if things do worsen in that regard, and in terms of our economic recovery, then a follow-up stimulus check may be back on the table at some point. Right now, though, that’s not a windfall Americans should be banking on.

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Stocks Slump After Murky Jobs Report as Markets Swing | Business News

Stocks Slump After Murky Jobs Report as Markets Swing | Business News

By STAN CHOE and ALEX VEIGA, AP Business Writers

A week of volatile swings on Wall Street ended Friday with more losses for stocks, as a mixed batch of U.S. job market data triggered another bout of dizzying trading.

The S&P 500 closed 0.8{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} lower after erasing a 0.7{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} gain in the early going. The benchmark index was coming off a jolting stretch where it swerved by at least 1.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} in five straight days, pounded by uncertainty about how badly the newest coronavirus variant will hit the economy and about when the Federal Reserve will halt its immense support for financial markets.

The Dow Jones Industrial Average slipped 0.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} and the Nasdaq composite lost 1.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. The Russell 2000 index of company stocks slumped 2.1{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. All the indexes also posted a weekly loss.

Treasury yields fell, rose and then fell again as investors struggled to square what the jobs report means the Federal Reserve will do on interest rates. The erratic movements fit right in with a week where the S&P 500 swung from a 1.9{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} gain to a 1.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} loss in one day.

Political Cartoons

“We got some mixed messages on the data” from the jobs report, “and that can make for some messy markets,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

The report, which is usually the most anticipated economic data by Wall Street each month, showed employers added only 210,000 jobs last month. It was a disappointing result when economists were expecting much stronger hiring of 530,000, and it raised worries the economy may stagnate while inflation remains high. That’s a worse-case scenario called “stagflation” by economists, and the omicron variant’s arrival makes its likelihood more uncertain.

But other areas of the jobs report showed better strength. More people are coming back to the workforce, and the unemployment rate improved to 4.2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} from 4.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.

Those encouraging numbers helped Treasury yields briefly climb during the morning. But they also came from a section of the jobs report that usually takes a back seat in investors’ eyes to the jobs-growth figure. That’s because they come from different surveys, one of employers and the other of households, and many investors see the job-growth numbers as the more reliable ones historically.

“Today’s non-farm payroll report looks messy to me,” said Jamie Cox, managing partner for Harris Financial Group. “Best to wait for the revisions next month before sounding the stagflation alarm too loudly.”

Some investors said the jobs report could ultimately push the Fed to get more aggressive about raising short-term interest rates off their record low. Others, though, said they expected the mixed report to have no effect, and the wide differences in opinion helped lead to the day’s sharp swings in the market.

What the Fed decides is a huge deal for stocks because low interest rates have been one of the main reasons the S&P 500 has roughly doubled since the early days of the pandemic. Low rates encourage borrowers to spend more and investors to pay higher prices for stocks.

The Fed has already begun slowing, or tapering, its program to buy billions of dollars of bonds each month to support the economy and markets. Chair Jerome Powell jolted markets earlier this week when he said the Fed could wrap up its bond-buying program months before the June target it had been on pace for. That would open the door for the Fed to make the more impactful decision of raising short-term rates.

“With the headlines on omicron and then figuring out if a faster taper also means a sooner hike — and investors worrying if the Fed is going to make a mistake — it’s to be expected we’re going to see some of this volatility,” said Allspring Global Investments’ Jacobsen.

Consider the yield on the two-year Treasury, which is heavily influenced by investors’ expectations for upcoming Fed actions. It fell, then recovered briefly, only to slide to 0.59{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. That’s down from 0.63{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} late Thursday.

The 10-year Treasury yield, which moves more on investors’ expectations for upcoming economic growth and inflation, was likewise unsteady. It zig-zagged immediately after the jobs report’s release and fell to 1.36{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} by late afternoon, down from 1.44{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} Thursday evening.

About 60{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} of the stocks in the S&P 500 fell, with some of Wall Street’s biggest recent stars offering the heaviest weights.

Microsoft fell 2{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}, Nvidia slid 4.5{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} and Tesla dropped 6.4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. They were part of a turnaround for high-growth companies that earlier had led the market on expectations they could keep growing even if the economy was slow.

Energy futures mostly fell. The price of U.S. crude oil slid 0.4{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}. Energy stocks fell broadly. Exxon Mobil dropped 0.6{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a}.

All told, the S&P 500 fell 38.67 points to 4,538.43. The Dow dropped 59.71 points to 34,580.08. The blue chip index pinballed between a gain of 161 points to a loss of 375. The Nasdaq fell 295.85 points to 15,085.47, while the Russell 2000 gave up 47.02 points to 2,159.31.

Chinese ride-hailing service Didi Global Inc. said Friday it will pull out of the New York Stock Exchange and shift its listing to Hong Kong as the ruling Communist Party tightens control over tech industries.

The Securities and Exchange Commission has moved to require that U.S.-listed foreign stocks like Didi’s disclose their ownership structures and audit reports, which could lead to some of them being delisted.

Markets around the world have swung through the week as investors struggle to handicap how much damage the newest coronavirus variant will ultimately do to the economy.

With few concrete answers about omicron, investors have been groping and sending markets back and forth as minor clues dribble out. Still to be determined are whether current vaccines are effective against the variant, whether people will be scared away from businesses because of it and whether already high inflation will worsen due to it.

AP Business Writer Elaine Kurtenbach contributed.

Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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5 Personal Finance Tips To Survive Holiday Shopping

5 Personal Finance Tips To Survive Holiday Shopping

Despite developing COVID-19 strain stress, inflation woes and the hesitation that many Americans have to ring in yet another new year that doesn’t seem so new, people are planning to spend more this holiday season. A wealth of surveys suggest that consumers are feeling more comfortable shopping in stores and are leveraging their online purchasing power after the wash that was the 2020 holiday season.

In fact, the National Retail Federation is predicting that, as jingle bells swing and jingle bells ring, Americans will spend up to $859 billion this year—the highest holiday retail sales on record. The average American, according to the research, will spend a cool K on the holidays. Similarly, Mass Mutual projects that Americans expect to spend an average of $1,243 on holiday purchases. The survey finds that 42 percent expect to spend at least $500 more than they did last year throughout the holidays, and 25 percent expect to spend at least $1,000 more.

However, not everyone is so quick to jump on the spending sleigh. A Deloitte survey finds that 11.5 percent of people are planning to sit out the season without spending anything on gifts. Those who do plan on going out dancin’ and prancin’ around retail stores are likely bigger earners. High-income households (raking in at least six figures) will spend five-times that of lower-income households (making less than $50,000) this holiday season. They’ll spend an average of $2,624 each over the holidays, which accounts for a 15 percent increase from 2020 and compares to the $536 that each lower-income household will spend, marking a 22{1b90e59fe8a6c14b55fbbae1d9373c165823754d058ebf80beecafc6dee5063a} decline from last year.

After all, according to a NerdWallet report, one in three shoppers still have holiday debt incurred last year hanging over their heads. And a LendingTree survey purports that 41 percent of people anticipate going into debt this season, too.

Wherever you fall on the spending spectrum, debt doesn’t do you well. Follow these personal finance tips for holiday shopping to make jingle bell time a swell time without spilling all your eggnog. 

And don’t forget to check out Q.ai’s Limited Edition Holiday Shopping Kit, which helps you tap into the holiday shopping frenzy in a less conventional way. The Kit considers where everyone else is spending their money, and then allows you to invest in the major retailers that are crushing it this season—so you can get a piece of the pie, err, ginger bread.

1. Build a budget that’ll keep you and your wallet merry.

Holiday shopping without a budget is like going grocery shopping on an empty stomach—but with even more glittering garnish to attract your attention. It’s important to make a budget of how much you can feasibly spend this holiday season without breaking the bank—and to make that budget before you hit the stores. 

2. Make a list, and check it twice.

Make a list of the people for whom you’re shopping, and even include yourself if you know that you’re someone who tends to treat yourself along the way. Consider those to whom you really need to give gifts (perhaps people like your family and your favorite boss) and the people who you’d ideally love to celebrate should you have any budget leftover (like your neighbor down the road).

Once you prioritize these people, give some serious thought as to what exactly you plan to purchase for them. Having a list of what you need to snag from the stores will help hold you accountable and not spend extra dollars (that add up) on that shiny ornament or adorable stocking stuffer you didn’t need. It’ll also help you save money if, for example, you can buy some stuff in bulk—like two-for-the-price-of-one candles for your colleagues. 

3. Ask Santa for better prices.

Once you know what you want to buy, don’t be so quick to do it. Shop around for the best prices. Some shops offer holiday sales or coupons you could collect to shave dollars off the price tag.

While physically going into all the dizzying stores crawling with shoppers can be daunting, you could shop online or call stores ahead of time to see what they have in stock—and for what cost to you.

4. Take advantage of all the holiday miracles.

Look out for little ways to save money here and there, like through shopping cart abandonment. This is an e-commerce term that refers to placing items in your online cart, but not completing the checkout process. Some retails may email you coupons to commit to checking out if they see that you’re sitting on some stuff. 

Also keep an eye out for discount codes that are floating around your social media, which will certainly serve you ads tailored to your online shopping history.

5. Keep your receipts at the ready.

At the end of the day, be sure to hang onto your receipts and collect gift receipts when necessary. The last thing you want to do is waste money on gifts that don’t fit or function properly, which would be a bummer for both the recipient and your wallet.

Keeping your receipts can also help you track your expenses and stay on track of your holiday budget.

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