Business

By Karen Freifeld and Alexandra Alper

WASHINGTON(Reuters) -The Biden administration plans next month to broaden curbs on U.S shipments to China of semiconductors used for artificial intelligence and chipmaking tools, several people familiar with the matter said.

The Commerce Department intends to publish new regulations based on restrictions communicated in letters earlier this year to three U.S. companies — KLA Corp, Lam Research Corp and Applied Materials Inc, the people said, speaking on the condition of anonymity.

The letters, which the companies publicly acknowledged, forbade them from exporting chipmaking equipment to Chinese factories that produce advanced semiconductors with sub-14 nanometer processes unless the sellers obtain Commerce Department licenses.

The rules would also codify restrictions in Commerce Department letters sent to Nvidia Corp and Advanced Micro Devices last month instructing them to halt shipments of several artificial intelligence computing chips to China unless they obtain licenses.

Some of the sources said the regulations would likely include additional actions against China. The restrictions could also be changed and the rules published later than expected.

So-called “is informed” letters allow the Commerce Department to bypass lengthy rule-writing processes to put controls in place quickly, but the letters only apply to the companies that receive them.

Turning the letters into rules would broaden their reach and could subject other U.S. companies producing similar technology to the restrictions. The regulations could potentially apply to companies trying to challenge Nvidia and AMD’s dominance in artificial intelligence chips.

Intel Corp and startups like Cerebras Systems are targeting the same advanced computing markets. Intel said it is closely monitoring the situation, while Cerebras declined to comment.

One source said the rules could also impose license requirements on shipments to China of products that contain the targeted chips. Dell Technologies, Hewlett Packard Enterprise and Super Micro Computer make data center servers that contain Nvidia’s A100 chip.

Dell and HPE said they were monitoring the situation, while Super Micro Computer did not respond to a request for comment.

A senior Commerce official declined to comment on the upcoming action, but said: “As a general rule, we look to codify any restrictions that are in is-informed letters with a regulatory change.”

A spokesperson for the Commerce Department on Friday declined to comment on specific regulations but reiterated that it is “taking a comprehensive approach to implement additional actions…to protect U.S. national security and foreign policy interests,” including to keep China from acquiring U.S. technology applicable to military modernization. 

Liu Pengyu, a spokesperson for the Chinese Embassy in Washington, said on Tuesday that China opposes the United States’”abuse of export control measures to restrict the export of semiconductor-related items to China.” The upcoming restrictions violate international trade rules, harm global growth and hurt U.S. and Chinese companies, he said.

KLA, Applied Materials and Nvidia declined to comment while Lam did not respond to requests for comment. AMD did not comment on the specific policy move but reaffirmed it does not foresee a “material impact” from its new licensing requirement.

‘CHOKE POINT’

The planned action comes as the President Joe Biden’s administration has sought to thwart China’s advances by targeting technologies where the United States still maintains dominance.

“The strategy is to choke off China and they have discovered that chips are a choke point. They can’t make this stuff, they can’t make the manufacturing equipment,” said Jim Lewis a technology expert at the Center for Strategic and International Studies. “That will change.”

In an update on China-related measures last week, the Chamber of Commerce, a U.S. business lobbying group, warned members of imminent restrictions on AI chips and chipmaking tools.

“We are now hearing that members should expect a series of rules or perhaps an overarching rule prior to the mid-term election to codify the guidance in recently issued (Commerce Department) ‘is-informed’ letters to chip equipment and chip design companies,” the chamber said.

The group also said the agency plans to add additional Chinese supercomputing entities to a trade blacklist.

Reuters was first to report in July that the Biden administration was actively discussing banning exports of chipmaking tools to Chinese factories that make advanced semiconductors at the 14 nanometer node and smaller. Tech news outlet Protocol reported plans to turn the letters sent to toolmakers into a regulation last month. Other elements of the rules, including the curbs on AI chip exports and the October release date, were first reported by Reuters.

U.S. officials have reached out to allies to lobby them to enact similar policies so that foreign companies would not be able to sell technology to China that American firms would be barred from shipping, two of the sources said.

“Coordination with allies is key to maximizing effectiveness and minimizing unintended consequences,” Clete Willems, a former Trump administration trade official said. “This should favor broader regulations that others can replicate instead of one-off ‘is informed’ letters.”

(Reporting by Karen Freifeld and Alexandra Alper; Additional Reporting by Stephen Nellis and Jane Lanhee Lee; Editing by Chris Sanders and Cynthia Osterman)

source

FedEx said Thursday it is shuttering storefronts and corporate offices while putting off new hires in a belt-tightening drive brought on by drop-off in its global package delivery business.

The company based in Memphis, Tennessee, warned it will likely miss Wall Street’s profit target for its fiscal first quarter that ended Aug. 31. And it said it expects business conditions to further weaken in the current quarter amid weaker global volume.

Its stock fell more than 16% in after-hours trading following the announcement.

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.,” FedEx CEO Raj Subramaniam said in a statement. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations.”

The company’s FedEx Express business was particularly hurt by challenges in Europe and weaker economic trends in Asia, which led to a roughly $500 million revenue shortfall for the segment. FedEx Ground revenue, meanwhile, came in about $300 million below the company’s forecasts.

High operating expenses were also a drag on the company’s results, FedEx said.

In response, it said it will cut costs by closing over 90 FedEx Office locations and five corporate offices, deferring new hires and operating fewer flights.

The company scrapped its forecast for its earnings in its current fiscal year that it had issued less than three months ago.

For the three months ended Aug. 31, FedEx now projects adjusted earnings per share of $3.44 and $23.2 billion in revenue. That’s below analysts’ consensus forecast of $5.14 adjusted earnings per share and $23.6 billion in revenue, according to FactSet.

Subramaniam noted that he remains confident FedEx will achieve its fiscal year 2025 financial targets.

For the current quarter, which ends in November, FedEx expects revenue to range between $23.5 billion and $24 billion, and adjusted earnings per share of at least $2.75. Wall Street analysts had expected adjusted earnings per share of $5.48 and $24.86 billion in revenue, according to FactSet.

The company still plans to buy back $1.5 billion of its common stock in fiscal 2023. It expects to buy back $1 billion of its common stock during the second quarter.

source

WASHINGTON (AP) — Faced with a decline in the number of corporate criminal prosecutions over the last decade, a top Justice Department official on Thursday unveiled new sweeteners for companies that cooperate with the government and a $250 million Congressional budget request to expand its work.

Every division that prosecutes corporate crime must now develop programs to incentivize companies to report misconduct, Deputy Attorney General Lisa Monaco said in a speech at New York University Law School. In some cases, no one will have to plead guilty to criminal charges if the violation was self-reported and the company fixed it.

The Justice Department’s top priority is prosecuting individuals who commit corporate crime, she said. She pointed to companies like Theranos, whose disgraced CEO Elizabeth Holmes was convicted on felony counts earlier this year.

“We will hold those who break the law accountable, regardless of their position, status, or seniority,” Monaco said.

Companies will also be required to come forward more quickly with evidence of suspected misdeeds to get leniency, and could eventually be rewarded for clawing back money from executives that break the law.

The new policies include alluring carrots for companies, but if they’re not accompanied by the stick of increased enforcement they may not have a big impact, so the $250 million request is a key piece, said Julian Andre, a former federal prosecutor who is now in private practice with the Los Angeles-based firm McDermott Will and Emery.

“Corporate prosecutions are still declining,” he said. “Until the DOJ devotes substantial additional resources to pursuing these time-intensive and complex investigations … many companies may still decide that voluntary disclosures are not in its best interests.”

source

HONG KONG (Reuters) – Macau’s government opens bids on Friday from seven companies, including a wildcard from Malaysian operator Genting, for licenses to operate casinos in the world’s biggest gambling hub, kicking off a closely watched battle for six available slots. Macau’s top officials including the city’s Economy and Finance secretary, Lei Wai Nong and Secretary for Administration and Justice, André Cheong, are due to attend the opening together with heads of Macau casinos including Las Vegas Sands Macau unit Sands China, Wynn Macau and MGM China. All six incumbent Macau players, which also include Galaxy Entertainment, Melco Resorts and SJM Holding, submitted bids ahead of a deadline on Wednesday together with GMM Limited, a holding company of Genting Group Chairman Sri Lim Kok Thay, which does not operate casinos in Macau. GMM’s application was seen as a surprise to many executives and analysts, with some saying it posed extra uncertainty for local operators. Genting would have been encouraged to apply and would be a good fit given they are the only operator of the applicants with a strong background in theme parks, said Ben Lee, founder of Macau gaming consultancy IGamiX. “There is a chance they can topple one of the incumbents, they (Genting) think so, too, otherwise they wouldn’t have laid out a HK$10 million ($1.27 million) buy in bet.” Genting operates casinos in Singapore, Malaysia, the United States and Britain and has extensive non-gaming operations — a key priority for the Macau government. It has also made a series of investments in China, including a prime ski resort which hosted the 2022 Beijing Winter Olympic games.

The sector has been reeling since the start of the COVID-19 pandemic, with revenues sliding 70% in 2021 to $10.8 billion from $36 billion in 2019. Macau’s new casino licenses are expected to begin in 2023 and are crucial for the six incumbents to keep operating their multi-billion dollar properties. They have collectively invested some $40 billion in Macau since casinos were liberalised more than 20 years ago. All companies submitted their bids in person via two large stacks of paper files, transported by trolleys, to the government on Wednesday, according to footage from public broadcaster TDM. They had to pay HK$10 million to apply. The bidding comes as Macau casinos have been slammed by ongoing COVID curbs and travel restrictions. Authorities have also rigorously tightened control over gambling operations in the former Portuguese colony via new legislation. The government is expected to review the proposals and negotiate with the bidders before announcing six winners by the end of November or early December, analysts said.

When bidding, “special consideration should be given to develop foreign tourist markets, experience in operating casino games, investment in gaming and non gaming projects for Macau’s benefit, plans to manage the casino, plans to monitor and prevent illegal activities and social responsibilities,” a statement on the government’s website said.

($1 = 7.8478 Hong Kong dollars)

(Reporting by Farah Master; Editing by Kim Coghill)

source

By Nathan Gomes and Lisa Baertlein

(Reuters) -FedEx Corp on Thursday withdrew the financial forecast it issued just three months ago, saying a global demand slowdown accelerated at the end of August and was on pace to worsen in the November quarter.

Shares in the global delivery firm tumbled more than 16% after it also reported revenue and profit for the first-quarter ended Aug. 31 that missed Wall Street targets. S&P 500 futures fell on Thursday as FedEx added to worries about a slowing global economy.

Altogether, a worldwide slowdown in economic activity caused shortfalls in FedEx Express revenues of $500 million and FedEx Ground revenues of $300 million in the quarter, FedEx said.

FedEx said it was cutting costs including shutting some FedEx Office locations, reducing labor hours and consolidating some sorting facilities.

The warning comes as consumers around the world are struggling with higher costs for necessities like food, fuel and shelter at the same time as they are shifting spending away from e-commerce back to in-person shopping, dining and travel.

The World Bank earlier on Thursday said the world’s three largest economies – the United States, China, and the euro area – have been slowing sharply, and even a “moderate hit to the global economy over the next year could tip it into recession.”

Some experts said FedEx should have caught wind of cooling demand much more quickly – especially after Amazon said it over built warehouses, U.S. seaport directors signaled decelerating imports and consumer discretionary spending continued to struggle due to inflation.

“They should have seen this coming a month ago,” said Satish Jindel, an industry consultant who helped start and expand the company that became FedEx Ground.

FedEx overestimated demand for last year’s peak holiday shipping season, drawing complaints from its independent contractors who paid for unneeded trucks and workers.

Shippers like FedEx and UPS imposed a variety of surcharges during the pandemic for issues from fuel to special handling, and those profit-boosting charges are at risk, said Jindel.

CLIMATE “CHALLENGING”

FedEx on Thursday said business has been hit by service challenges in Europe and macroeconomic issues in Asia. The region’s biggest economy, China, is grappling with COVID-19 lock downs and heat wave-induced power outages.

The warning dragged down shares of rival delivery companies as well as retailers in extended trading. United Parcel Service dropped 5%, while Amazon fell 1.9%.

FedEx expects to report revenue of $23.2 billion for the first quarter, missing analysts’ expectations of $23.59 billion, according to Refinitiv IBES. Adjusted earnings are expected to be $3.44 per share, well below estimates of $5.14.

The company withdrew its forecast for the fiscal year.

The wide gulf between FedEx’s performance and Wall Street’s expectations comes after analysts had already tempered estimates for the quarter, said Cowen analyst Helane Becker, who added that company shares have shed about 10% of their value since they issued their now-withdrawn forecast in June.

And the warning will likely ramp up pressure on FedEx’s new chief executive officer, Raj Subramaniam, to close a profitability gap with UPS, after it ceded two director seats to activist investor D.E. Shaw in June.

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” Subramaniam said in a statement.

(Reporting by Nathan Gomes and Shariq Khan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Peter Henderson and Christopher Cushing)

source

SEOUL (Reuters) – South Korea’s unemployment rate fell to a record low in August, while employed people increased for an 18th straight month, government data showed on Friday.

The country’s seasonally adjusted unemployment rate for August fell to 2.5% from 2.9% in July, hitting the lowest since the data release began in June 1999, according to the Statistics Korea.

The number of employed people increased by 807,000 compared with the same month a year earlier, extending annual gains to an 18th consecutive month. The pace of gains though was milder than 826,000 in July and 841,000 in June.

“Employment growth is expected to slow going forward as uncertainties are increasing on worsening external conditions and weaker consumption due to high inflation and interest rate hikes,” vice finance minister Bang Ki-sun said at an economic policy meeting after the data release.

The increase was driven mostly by the manufacturing sector, which added 240,000 employees, the biggest under the current categorisation that began in 2013, followed by health and social welfare services’ 123,000 and agriculture and fisheries’ 9,000.

By age group, those 60 and older accounted for more than half by adding 454,000, while workers in their 50s, 30s and 20s, increased by 182,000, 98,000 and 65,000, respectively.

(Reporting by Jihoon Lee; Editing by Jacqueline Wong)

source

By David Shepardson

WASHINGTON (Reuters) – U.S. passenger railroad Amtrak said on Thursday it was working to quickly restore canceled trains after a freight rail labor deal was announced, averting a rail shutdown.

Amtrak had announced on Wednesday that it would temporarily cancel all of its long-distance trains starting on Thursday – along with some state-supported trains – because of a potential freight rail work stoppage that could start the following day.

Amtrak workers were not involved in the labor dispute, but the railroad operates almost all of its 21,000 route miles (33,800 km) outside the U.S. Northeast Corridor on track owned, maintained and dispatched by freight railroads.

Railroads including Union Pacific, Berkshire Hathaway’s BNSF and Norfolk Southern had until a minute after midnight on Friday to reach tentative deals with three holdout unions representing about 60,000 workers before a work stoppage affecting freight and Amtrak could begin.

Major U.S. railroads and unions secured a tentative deal after 20 hours of intense talks brokered by President Joe Biden’s administration to avert a rail shutdown that could have hit food and fuel supplies across the country and beyond and caused far-reaching transportation woes.

Amtrak made its announcement on Wednesday after earlier in the week deciding to cancel 10 long-distance trains throughout the United States ahead of the Friday deadline. Before the COVID-19 pandemic, Amtrak had about 4.4 million passengers annually on long-distance trains.

Late Wednesday, Amtrak said it would also cancel some state-supported train services starting Thursday, including the Capitol Corridor, Amtrak Cascades, Heartland Flyer, Illinois, Michigan and Virginia services, as well as San Joaquins and part of the Pacific Surfliner and Springfield services.

Some commuter train systems such as Chicago’s Metra had also said they could have been forced to begin cutting service on Thursday.

(Reporting by David Shepardson; Editing by Jason Neely and Will Dunham)

source

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. retail sales unexpectedly rebounded in August as Americans ramped up purchases of motor vehicles and dined out more amid lower gasoline prices, but demand for goods is cooling as the Federal Reserve aggressively raises interest rates.

Consumer spending, however, is likely to remain supported by persistent strength in the labor market, with other data on Thursday showing the number of people filing new claims for unemployment benefits last week fell to the lowest level in more than three months.

Labor market resilience together with a surprise increase in consumer prices in August is likely to give the U.S. central bank ammunition to deliver a third consecutive 75-basis-point interest rate hike next Wednesday.

“Households continue to spend, supported by strong job growth and rising nominal incomes,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “However, households face headwinds from elevated inflation that is not yet showing any significant sign of abating.”

Retail sales increased 0.3% last month. Data for July was revised down to show retail sales falling 0.4% instead of being unchanged as previously reported. Economists polled by Reuters had forecast sales would be unchanged, with estimates ranging from as low as a 0.5% decline to as high as a 0.5% increase.

The national average gasoline price dropped to about $3.82 per gallon in late August after hitting an all-time high just above $5.00 in mid-June, according to data from AAA. Prices at the pump were averaging $3.698 per gallon on Thursday.

Sales at service stations dropped 4.2% last month, while receipts at auto dealerships increased 2.8%. Excluding gasoline and motor vehicles, retail sales gained 0.3%.

Sales at clothing and general merchandise stores increased solidly, likely boosted by back-to-school shopping. But online and mail-order retail sales fell 0.7%.

Receipts at furniture stores dropped 1.3%, while sales at building material and garden equipment retailers increased 1.1%. Sales at electronics and appliance stores dipped 0.1%. There were strong gains in sales at hobby, musical instrument and book stores. Receipts at bars and restaurants, the only services category in the retail sales report, increased 1.1%.

U.S. stocks opened lower. The dollar was largely unchanged against a basket of currencies. U.S. Treasury prices fell.

UNDERLYING DEMAND SLOWING

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month. Data for July was revised lower to show these so-called core retail sales increasing 0.4% instead of 0.8% as previously reported.

Core retail sales correspond most closely with the consumer spending component of gross domestic product. A steady pace of consumer spending and strong export growth helped to limit the drag on the economy from a moderation in the pace of inventory accumulation in the second quarter.

Last month’s unchanged core retail sales and the downward revision to July data could prompt economists to trim their third-quarter GDP growth estimates, which are mostly below a 2% annualized rate.

GDP contracted at a 0.6% rate last quarter after declining at a 1.6% pace in the January-March period. The economy is not in recession, with the income side of the growth ledger showing a 1.4% rate of expansion in the second quarter, thanks to labor market resilience.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits fell 5,000 to a seasonally adjusted 213,000 for the week ended Sept. 10, the lowest level since the end of May.

Despite the hand wringing about a possible recession next year due to higher borrowing costs, there has not been a surge in layoffs. Economists say companies are hoarding workers after experiencing difficulties hiring in the past year as the COVID-19 pandemic forced some people out of the workforce in part because of prolonged illness caused by the virus.

There were 11.2 million job openings at the end of July, with two jobs for every unemployed person.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

source

MONTREAL (Reuters) – Air Canada on Thursday said it would purchase 30 electric-hybrid regional aircraft from Heart Aerospace, as more airlines turn to new technologies to lower emissions and fuel costs.

Global airlines are stepping up plans to tackle climate change as they face mounting pressure from regulators and environmental groups over the impact of billions of extra passengers expected to take to the skies in coming decades.

Sweden-based Heart’s battery-powered aircraft under development will have capacity for up to 30 passengers and generate zero emissions when they enter service, which is expected in 2028, Canada’s largest carrier said in a release.

The release did not disclose a value for the deal.

Air Canada’s agreement, which also includes a $5 million equity stake in Heart Aerospace, follows a 2021 deal by U.S. carrier United Airlines to acquire 100 19-seat planes from the startup.

(Reporting by Allison Lampert in Montreal; Editing by Bernadette Baum)

source

WASHINGTON (Reuters) – Production at U.S. factories edged up in August amid a decline at motor vehicle assembly plants, but gains in the output of machinery as well as computer and electronic products pointed to underlying strength in manufacturing.

Manufacturing output gained 0.1% last month after increasing 0.6% in July, the Federal Reserve said on Thursday. Economists polled by Reuters had forecast factory production would be unchanged. Output increased 3.3% compared to August 2021.

Manufacturing, which accounts for 11.9% of the U.S. economy, is slowing as spending shifts back to services from goods.

Higher interest rates as the Fed fights inflation as well as cooling demand overseas and a strong dollar are headwinds for factories.

Production at auto plants dropped 1.4% last month. Auto production surged 3.2% in July, in part boosted by seasonal factors, which were not repeated in August. Excluding motor vehicles, manufacturing gained 0.2%.

Output of long-lasting manufactured goods was unchanged. Gains of at least 1.0% were recorded by makers of machinery, computer and electronic products as well as aerospace and miscellaneous transportation equipment. They were, however, offset by losses of more than 1% reported by producers of wood and furniture products.

Production of nondurable manufactured goods rose 0.2%.

Mining output was unchanged in August after posting five consecutive monthly gains. Utilities production fell 2.3%. As a result, overall industrial production slipped 0.2% in August after increasing 0.5% in July.

Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, was unchanged at 79.6% in August. It is 1.4 percentage points above its long-run average. Overall capacity use for the industrial sector fell 0.2 percentage point to 80.0% last month. It is 0.4 percentage point above its 1972-2021 average.

Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy – how far growth has room to run before it becomes inflationary.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

source