Business

By Mrinalika Roy

(Reuters) -Bluebird bio slumped nearly 15% on Thursday as investors fretted over sales potential of its newly approved ultra-rare blood disorder gene therapy that is the most expensive treatment to date at $2.8 million.

The one-time treatment, Zynteglo, was approved by the U.S. Food and Drug Administration on Wednesday for patients with beta-thalassemia requiring regular blood transfusions. There are about only 1,500 of them in the United States.

Analysts do not see the drug becoming a major revenue driver for the company, despite that price tag, as the addressable patient population is tiny and not many may be willing to undergo the treatment.

“Don’t expect blockbuster sales from Zynteglo,” Oppenheimer Company analyst Mark Breidenbach said.

Of the total addressable patient pool, bluebird said there are only 850 eligible patients, with about one-third excited for the gene therapy, while the remaining either unsure or may never opt for it, Chief Operating Officer Tom Klima said.

Founded in 2010, bluebird has been riddled with challenges in the past few months; it pulled Zynteglo from Europe in a dispute over pricing and cut 30% of its workforce. In March, the company also flagged “going concern” doubts.

Wedbush analyst David Nierengarten said the drug is unlikely to generate major revenue in the United States and expects no more than 40 to 50 patients opting for it annually.

The silver lining for bluebird is the priority review voucher it received from the FDA upon approval, which it expects will help it generate $100 million to $110 million.

Such vouchers make their holders eligible to have one of their drugs reviewed in six months, compared to the standard 10 months.

“They’ll get more revenue in the first year from the priority review voucher than they will from selling Zynteglo,” Nierengarten said.

(Reporting by Mrinalika Roy in Bengaluru; Editing by Anil D’Silva and Shinjini Ganguli)

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By Kevin Buckland

TOKYO (Reuters) – The U.S. dollar climbed to a fresh one-month high against a basket of major peers on Friday as Federal Reserve policymakers continued to talk up the need for further interest rate hikes ahead of their key Jackson Hole symposium next week.

The dollar index rose 0.121% to 107.620, after earlier touching 107.68, its highest since July 18. The gauge is on track for a 1.89% rally this week, which would be its best weekly performance since June 12.

The greenback rose to 136.38 yen for the first time since July 28, while the euro dipped to $1.00735, the weakest since July 15. Sterling sank to $1.1905, its weakest since July 21.

St. Louis Fed President James Bullard said he is leaning toward supporting a third straight 75-basis-point interest rate hike in September, while San Francisco Fed colleague Mary Daly said hiking rates by 50 or 75 basis points next month would be “reasonable.”

Kansas City Fed President Esther George said she and her colleagues will not stop tightening policy until they are “completely convinced” that overheated inflation is coming down.

The dollar is “smartly higher” with central bank officials “all making clear the Fed still has work to do raising rates,” even as they differed on by how much, Ray Attrill, the head of currency strategy at National Australia Bank in Sydney, wrote in a client note.

“It’s hard to pin European currency weakness on specific news, albeit the case for more weakness on relative (global) economic grounds has been blindingly obvious for weeks.”

The euro is on course to decline 1.71% since last Friday, which would be its worst week since July 8. Sterling is set for a 1.80% drop, its biggest weekly tumble since May 6.

European currencies failed to get a lift from renewed inflation fears putting pressure regional central banks to keep tightening policy, instead worrying about risks of recession.

European Central Bank board member Isabel Schnabel fueled inflation worries overnight by saying consumer prices could still accelerate in the short term. British price growth hit double digits on Wednesday.

Meanwhile, despite the Fed chorus on the need for higher rates, the odds of another supersized 75 basis point hike next month have receded to 40% in money markets.

However, consumer price inflation and jobs data for August, due before the Fed’s September meeting, will likely affect the scale of tightening.

Fed Chair Jerome Powell will have a chance to update the market on his views at the annual Jackson Hole symposium on Aug. 25-27.

Elsewhere, the Australian dollar fell 0.26% versus the greenback at $0.690, and touched $0.6898 for the first time since Aug. 5. The New Zealand dollar lost 0.40% to $0.6240, after dipping to $0.6229, also the lowest since Aug. 5.

In cryptocurrencies, bitcoin fell 2.28% to $22,880.00. Ethereum was down 3.09% to $1,819.44.

(Reporting by Kevin Buckland; Editing by Sam Holmes)

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By David Shepardson and Hyunjoo Jin

WASHINGTON (Reuters) -U.S. auto safety regulators on Thursday asked Tesla Inc to answer questions about its in-car camera intended to monitor driver awareness as part of a probe into 830,000 Tesla vehicles that employ the carmaker’s advanced driver assistance system called Autopilot.

The National Highway Traffic Safety Administration (NHTSA) is assessing the performance of Autopilot after earlier identifying a dozen crashes in which Tesla vehicles struck stopped emergency vehicles.

In June, it upgraded its probe to an engineering analysis – a required step before it could potentially demand a recall.

NHTSA’s nine-page letter demands Tesla answer questions by Oct. 12 about “the role that the Cabin Camera plays in the enforcement of driver engagement/attentiveness.”

According to Tesla, the cabin camera – a camera located above the rear view mirror – can determine driver inattentiveness and provide audible alerts to remind the driver to keep their eyes on the road when Autopilot is engaged.

NHTSA said it was seeking information on the cabin camera’s “impact on driver engagement alert types and timing” as well as “recoverable data elements pointing to its influence.”

The agency said it wanted an explanation for “design decisions” on driver engagement enforcement, “including the evidence that justifies the period of time that the driver is permitted to have their hands off the steering wheel before receiving a warning.”

The regulator is reviewing whether Tesla vehicles adequately ensure drivers are paying attention. The agency said in June evidence suggested drivers in most crashes under review had complied with Tesla’s alert strategy, raising questions about its effectiveness.

Tesla, which has disbanded its press office, did not respond to a request for comment.

Consumer Reports said when it evaluated Tesla’s driver attention monitoring camera in late 2021 “we found that it wasn’t adequate to ensure that the driver was fully paying attention when the driver was using Autopilot and Full Self Driving (FSD) features.”

The magazine said it “could block the in-cabin camera, and the car wouldn’t issue a warning, slow down the car, or shut off the systems.”

In June, Consumer Reports said the company had installed an over-the-air update that issued a warning when the camera is covered while FSD is engaged, but not with Autopilot.

Autopilot is intended to enable cars to steer, accelerate and brake automatically within their lane, while FSD enables vehicles to obey traffic signals and make lane changes.

In addition to the defect probe, NHTSA has opened 38 special investigations since 2016 of crashes involving Tesla vehicles and where Autopilot or other advanced systems were suspected of being used. A total of 19 deaths have been reported in those Tesla-related investigations.

Separately, California’s state transportation has accused Tesla of falsely advertising the features as providing autonomous vehicle control.

Tesla said in notices filed with the state that were released Thursday that it is seeking a hearing on the complaints and intends to present a defense.

California’s Department of Motor Vehicles is seeking remedies that could include suspending Tesla’s license to sell vehicles in the state and requiring the company provide restitution to drivers.

(Reporting by David Shepardson and Hyunjoo Jin; Editing by Rosalba O’Brien)

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NEW YORK (AP) — Creem, which billed itself as “America’s only rock ‘n’ roll magazine” during two decades of existence that ended in 1989, is being revived next month.

The return is a remarkable story of persistence by J.J. Kramer, who was bequeathed the magazine at age 4 upon the death of his father, founder Barry Kramer. It will reappear during far different times, with a marketing plan that the late writer Lester Bangs or makers of the fake “Boy Howdy” beer could hardly conceive of.

The first new issue, a glossy quarterly, is due out in September and only available to people who spend $79 for a subscription.

Founded in Detroit, Creem was the impish, slightly rude younger brother of Rolling Stone. The name was an intentional misspelling of the rock band Cream, one of the first editor’s favorites.

Though known best for Motown soul, Detroit was also a rock ‘n’ roll hotbed with artists like MC5, Iggy Pop, Alice Cooper, Mitch Ryder and Bob Seger. Hard rocking bands, and then the onslaught of punk, provided the magazine’s backbone in its 1970s heyday.

Creem was an incubator of writing talent like Dave Marsh, Robert Christgau, Lisa Robinson, Cameron Crowe and Greil Marcus.

Rock stars weren’t put on a pedestal in Creem, and its reviews could be nasty — along with sexist and profane. Bangs was the toughest, and his feud with Lou Reed was legendary. Creem poked fun at a stuffy Dewar’s scotch profiles ad campaign by picturing artists holding beer cans emblazoned with a “Boy Howdy” logo drawn by cartoonist Robert Crumb.

In a 2019 documentary about the magazine, former R.E.M. singer Michael Stipe recalled first seeing Creem while in high school detention, realizing that he’d found the perfect gang of misfits.

“Buying Creem was a little bit like buying Playboy,” actor Jeff Daniels said in the documentary. “You didn’t want your parents seeing either one of them.”

Kramer’s death from a drug overdose in 1981 marked the beginning of the end. His son was named in the magazine’s masthead as a preschool “chairman of the board.” Barry Kramer’s widow, Connie, as publisher and acting on her son’s behalf because he was a minor, sold the bankrupt publication in 1985. Creem ceased publishing four years later.

With all the bravado of a 9-year-old, J.J. Kramer remembers telling his mother he would get it back some day.

“I’ve really spent most of my adult life trying to get to this point,” he told The Associated Press in advance of the revival. “It’s something I felt like I had to do. There’s a magnet that draws me to Creem. It’s almost like it was predetermined in a way that I couldn’t fight it.”

Kramer regained control of Creem, although it took several years. It helps that he’s an intellectual property attorney.

Now he’s chairman, again, and has put together a plan for the revival along with John Martin, a former Vice publisher who is CEO of Creem Entertainment. The idea is to make Creem the centerpiece of a media company that includes podcasts, merchandise and branded entertainment.

“Why is there not a Creemfest?” Martin asked. “That’s something that sounds like it should exist and it will exist.”

Yet it’s not the 1970s anymore. Rock ‘n’ roll is no longer as influential in culture as it once was; popular music is dominated by rap and pop. The music press is as diffuse as music itself. The well-made rock ‘n’ roll glossies on the market, like Mojo or Uncut, are British-based.

Kramer and Martin believe there’s still room for a publication that pulls rock ‘n’ roll fans together, from people who like HAIM to fans of Metallica. The world also needs people who can write about the genre with attitude, Martin said.

“When was the last time you laughed when you read about music?” Martin said.

While Bangs, who died in 1982, is no longer around, there are many new voices important to the current scene, some working on forums like Substack, he said.

The first issue’s mix of articles speaks to Creem’s intended breadth. For nostalgists, there’s an excerpt of a never-published book on the Who, a reevaluation of a 1972 rock album put out by the Osmonds and a revival of the “Stars’ Cars” feature with Slash and his wheels. There are stories on newer artists of various popularity levels like Mac DeMarco and Amyl and the Sniffers and personalities from rap and R&B like Lil Aaron and KeiyaA.

Samir Husni, founder and director of the Magazine Media Center, said he’s already paid for a subscription and is impressed by the new business plan. Plenty of people remember Creem fondly and would be curious about a reboot, he said.

“They are looking for customers who count, instead of counting customers,” Husni said.

That said, magazine revivals are more likely to fail then succeed, he said. A brand may have value, but not if people think time has passed it by. Husni said Creem may have to rethink its plans not to offer the magazine on newsstands or in bookstores.

The revival has been draining physically, emotionally and mentally, Kramer said. There were a number of times he could have — maybe should have — walked away, he said.

But he and Martin said they are convinced there is a market for the reimagined Creem, and they have the right plan to reach it.

“We’re not a cover band,” Kramer said. “We are pulling this magazine and brand forward.”

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By Mehr Bedi and Ananya Mariam Rajesh

(Reuters) – Tapestry Inc and Estee Lauder Cos Inc forecast full-year earnings below estimates on Thursday, underscoring the hit global luxury goods companies are taking from China’s COVID-19 lockdowns.

Major Chinese cities have imposed strict restrictions this year under Beijing’s zero-COVID policy, leaving companies that have substantial exposure to the country with piles of unsold goods as cautious consumers stay away from crowded shopping districts.

Tapestry and Estee Lauder join Gucci-owner Kering SA, Ray-Ban maker EssilorLuxottica as well as Ralph Lauren Corp in flagging a sales hit in China, a key growth market for high-end fashion companies.

Estee, which makes MAC lipstick and La Mer skincare products, gets over a third of its revenue from China, while Coach handbag maker Tapestry generates about 20% of its sales from the region, according to analysts.

Tapestry, which also owns Kate Spade and Stuart Weitzman, said it was beginning to see a recovery in demand in China, with sales expected to fall 15% in the first quarter, compared with a 32% drop in the fourth quarter.

“The weakness in China has only really come about because of the lockdown. Once that region is out of those lockdowns, we see green shoots of the consumer coming back there,” Jane & Hali Associates analyst Jessica Ramirez said.

Tapestry forecast fiscal 2023 earnings between $3.80 and $3.90 per share, lower than analysts’ estimates of $3.91, according to Refinitiv IBES data. Estee said it expected adjusted profit per share to increase between 5% and 7%, below Wall Street’s view of a 10.5% gain.

Still, both companies beat fourth-quarter profit estimates as affluent American shoppers splurge on high fashion as they resume socializing.

“We took an incremental price increase in January because of inflation and still saw incredibly strong demand,” Estee finance chief Tracey Travis told Reuters.

(Reporting by Ananya Mariam Rajesh and Mehr Bedi in Bengaluru; Writing by Uday Sampath Kumar; Editing by Shinjini Ganguli, Maju Samuel and Anil D’Silva)

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By Chibuike Oguh

NEW YORK (Reuters) – Global equity markets were choppy and U.S. Treasury yields fell on Thursday, as uncertainty over the pace of interest rate hikes prevailed among investors after the Federal Reserve’s meeting minutes showed officials were determined to curb rising prices.

Markets have remained bearish amid concerns about a looming recession, even though Fed officials indicated in the minutes of their July meeting released on Wednesday that they would adopt a less aggressive stance if inflation starts to recede.

“The markets are still trying to figure out the Fed minutes,” causing volatility, said Charles Self, chief investment officer at Tandem Wealth Advisors in Appleton, Wisconsin.

“The minutes were uniformly hawkish in our view,” Self added. “It’s clear that among all the voting members that curing inflation is the No. 1 choice and they’re going to do whatever is necessary as far as raising rates to get there. We think they’re using the labor market as cover.”

MSCI’s gauge of stocks in 50 countries across the globe shed 0.23%. The pan-European STOXX 600 index, however, edged up 0.39%.

U.S. Treasury yields edged lower as investors continued to digest the Fed meeting minutes. Benchmark 10-year notes were down to 2.8713%, from 2.895% on Wednesday. Two-year notes retreated to 3.2246%, from 3.295%.

The yield curve between two- and 10-year Treasury notes, widely viewed as an indicator of impending recession, remained inverted at minus 38 basis points on Thursday.

“Since the Fed’s July 27 meeting, the two-year yields have been up 43 basis points, meaning that the bond market thinks they’re going to raise rates higher for a longer period of time, whereas the stock market has been up 5%, meaning the market thinks they’ll raise rates relatively quickly and maybe even decrease rates next year,” Self added.

“Well, I think the bond market is usually right.”

MAJOR INDEXES

On Wall Street, all major indexes were trading lower, driven by a selloff in stocks in the healthcare, financials, consumer discretionary and consumer staples sectors.

The Dow Jones Industrial Average fell 0.33% to 33,867.17, the S&P 500 lost 0.11% to 4,269.42, and the Nasdaq Composite dropped 0.05% to 12,931.39.

Oil prices gained about 2% as robust U.S. fuel consumption data and an expected drop in Russian supply later in the year offset concerns that slowing economic growth could undercut demand.

Brent futures rose 2.26% to $95.77 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 2.04%, to $89.91.

The U.S. dollar index hit a three-week high as investors reevaluated Wednesday’s Fed minutes as more hawkish than originally interpreted and after data showed solid U.S. economic momentum.

The dollar index rose 0.647%, with the euro down 0.78% to $1.0101.

Gold reversed earlier gains and was lower on a firmer dollar, as investors looked for more economic cues that could influence rate hikes. Spot gold dropped 0.2% to $1,757.68 an ounce, while U.S. gold futures gained 0.15% to $1,762.90 an ounce.

(Reporting by Chibuike Oguh in New York; Editing by Susan Fenton and David Holmes)

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By Rowena Edwards, Maha El Dahan and Alex Lawler

LONDON (Reuters) -Policymakers, lawmakers and insufficient oil and gas sector investments are to blame for high energy prices, not OPEC, the producer group’s new Secretary General Haitham Al Ghais told Reuters on Thursday.

A lack of investment in the oil and gas sector following a price slump sparked by COVID-19 has significantly reduced OPEC’s spare production capacity and limited the group’s ability to respond quickly to further potential supply disruption.

The price of Brent crude came close to an all-time high of $147 a barrel in March, after Russia’s ordering of troops into Ukraine exacerbated supply concerns. While prices have since declined, they are still painfully high for consumers and businesses globally. 

“Don’t blame OPEC, blame your own policymakers and lawmakers, because OPEC and the producing countries have been pushing time and time against for investing in oil (and gas),” Al Ghais, who took office on Aug. 1, said in an online interview.

Oil and gas investment is up 10% from last year but remains well below 2019 levels, the International Energy Agency said last month, adding that some of the immediate shortfalls in Russian exports needed to be met by production elsewhere.

The OPEC official also pointed the finger at a lack of investment in the downstream sector, adding that OPEC members had increased refining capacity to balance the decline in Europe and the United States.

“We are not saying that the world will live on fossil fuels forever … but by saying we’re not going to invest in fossil fuels … you have to move from point A to point B overnight,” Al Ghais said.

OPEC exists to ensure the world gets enough oil, but “it’s going to be very challenging and very difficult if there is no buy-in into the importance of investing,” he said, adding that he hopes “investors, financial institutions, policymakers as well globally seriously take this matter (to) heart and take it into their plans for the future.”

RELATIVELY OPTIMISTIC

Oil has tumbled since March and Brent hit a six-month low below $92 a barrel this week.

The slide reflects fears of economic slowdown and masks physical market fundamentals, Al Ghais said as he took a relatively optimistic view on the outlook for 2023 as the world tackles rising inflation.

“There is a lot of fear,” he said. “There is a lot of speculation and anxiety, and that’s what’s predominantly driving the drop in prices.”

“Whereas in the physical market we see things much differently. Demand is still robust. We still feel very bullish on demand and very optimistic on demand for the rest of this year.”

“The fears about China are really taken out of proportion in my view,” said Al Ghais, who worked in China for four years earlier in his career. “China is a phenomenal place of economic growth still.”

The Organization of the Petroleum Exporting Countries, plus Russia and other allies, known as OPEC+, has unwound record oil-output cuts made in 2020 at the height of the pandemic and in September is raising output by 100,000 barrels per day.

Ahead of the next meeting which OPEC+ holds on Sept. 5, Al Ghais said it was premature to say what it will decide, although he was positive about the outlook for next year.

“I want to be very clear about it – we could cut production if necessary, we could add production if necessary.”

“It all depends on how things unfold. But we are still optimistic, as I said. We do see a slowdown in 2023 in demand growth, but it should not be worse than what we’ve had historically.”

“Yes, I am relatively optimistic,” he added of the 2023 outlook. “I think the world is dealing with the economic pressures of inflation in a very good way.”

OPEC+ began to restrain supply in 2017 to tackle a supply glut that built up in 2014-2016, and OPEC is keen to ensure Russia remains part of the OPEC+ oil production deal after 2022, Al Ghais said.

“We would love to extend the deal with Russia and the other non-OPEC producers,” he said.

“This is a long-term relationship that encompasses broader and more comprehensive forms of communication and cooperation between 23 countries. It’s not just in terms of production adjustment.”

(Reporting by Rowena Edwards, Alex Lawler, Dmitry Zhdannikov, Maha El Dahan and Olesya Astakhova; Editing by David Evans and David Holmes)

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By Bansari Mayur Kamdar and Devik Jain

(Reuters) – Wall Street’s main indexes struggled for direction and pared early gains Thursday as investors scrutinize the Federal Reserve’s minutes of the July meeting for a “less hawkish” tone against the backdrop of data that had eased inflation worries.

While the minutes did not clearly hint at the pace of rate increases, it showed policymakers committed to raising rates to tame inflation even as they start to acknowledge the risk they might go too far and curb economic activity too much.

Traders expect a greater chance of a 50 basis point rise in borrowing costs in September instead of a 75 basis point increase for a third time. [FEDWATCH]

“The recent rally clearly has been driven by a combination of better than feared economic data and earnings,” said Art Hogan, chief market strategist at B. Riley Wealth, calling the Fed’s minutes as “less hawkish”.

High-growth technology stocks such as Alphabet and Nvidia rose 0.3% and 1.9%, respectively, in choppy trading as U.S. Treasury yields pulled back. [US/]

Wall Street’s indexes have been gaining over the last few weeks after a softer-than-expected inflation in July, with focus now on the Fed’s annual Jackson Hole symposium late next week.

Either a 50 bps or 75 bps rate hike in September would be a “reasonable” way to get short-term borrowing costs to a little over 3% by year end and a little higher than that in 2023, San Francisco Federal Reserve Bank President Mary Daly said on Thursday.

The Fed has lifted its benchmark interest rate by 225 bps so far this year to control four-decades high inflation.

Meanwhile, number of Americans filing new claims for unemployment benefits fell last week and data for the prior period was revised sharply down, suggesting the labor market remains tight despite a slowdown due to higher interest rates.

“The Fed is looking at the (labor market) and they will continue to be data dependent,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“We’ve had big gains, the market is digesting that at this point. Right now, we’re in a holding pattern and some folks are worried that we’re going to see another low.”

At 12:44 p.m. ET, the Dow Jones Industrial Average was down 115.86 points, or 0.34%, at 33,864.46, the S&P 500 was down 5.08 points, or 0.12%, at 4,268.96, and the Nasdaq Composite was down 8.79 points, or 0.07%, at 12,929.34.

The tech-heavy Nasdaq has bounced nearly 22% from its mid-June lows, while the benchmark S&P 500 has risen 17%, supported by upbeat quarterly results.

However, retail earnings have been mixed so far. Encouraging reports from Walmart and Home Depot earlier this week were offset by Target’s profit slump, which dragged the retail sector down 1.2% in the previous session.

Kohl’s Corp slid 5.5% after the retailer cut its full-year sales and profit forecasts.

Verizon Communications Inc declined 2.6% after MoffettNathanson downgraded the telecom operator’s shares.

Declining issues outnumbered advancers for a 1.07-to-1 ratio on the NYSE and a 1.25-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and 29 new lows, while the Nasdaq recorded 47 new highs and 50 new lows.

(Reporting by Bansari Mayur Kamdar and Devik Jain in Bengaluru; Editing by Shounak Dasgupta)

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By Kevin Yao

BEIJING (Reuters) -China’s central bank is set to take more easing steps, pressured by a shaky economy that is undercutting jobs, but it faces limited room to manoeuvre due to worries over rising inflation and capital flight, policy insiders and analysts said.

Analysts now expect cuts in the country’s benchmark lending rates as early as Monday, after the People’s Bank of China (PBOC) unexpectedly lowered two key rates this week as data showed the economy unexpectedly slowed in July.

But the PBOC is walking a tightrope — seeking to support the COVID-ravaged economy while avoiding massive stimulus that could add to inflationary pressures and risk outflows from China’s struggling stock and bond markets, as the U.S. Federal Reserve, and other economies, aggressively raise interest rates.

China’s economy narrowly avoided contracting in the second quarter amid widespread lockdowns and a deepening property crisis, which have badly damaged consumer and business confidence, and COVID cases have rebounded again in recent weeks. Nomura estimates 22 cities are currently in full or partial lockdowns, making up 8.8% of GDP.

“Currently, the main problem that China faces is slowing economic growth, safeguarding growth is the top priority,” Yu Yongding, an influential government economist who previously advised the PBOC, told Reuters.

“What we should do is to continue to adopt expansionary fiscal and monetary policy, including cutting interest rates,” he said.

China is likely to cut its benchmark lending rate for companies and home buyers, known as the loan prime rate (LPR), at its next setting on Aug. 22, policy insiders and analysts said.

Shortly before weak data was released on Monday, the PBOC unexpectedly cut the rate on its medium-term lending facility (MLF) for the second time this year, by 10 basis points. It also cut its reverse repo rate by the same margin. Both were already at record lows.

“The rate cut is not enough – we should step up easing,” said a government adviser who spoke on condition of anonymity.

However, the central bank is unlikely to cut banks’ reserve requirement ratio (RRR), a traditional tool to boost liquidity, any time soon, given the financial system is already awash with cash, China watchers said.

The central bank already has slashed the average RRR level to 8.1% from 14.9% in early 2018, pumping a staggering 9 trillion yuan ($1.33 trillion) into the economy. 

The PBOC may instead use structural policy tools, such as low-cost loans, to give targeted support to ailing small firms and sectors favoured by state policies, they said.

The sputtering of the world’s second-largest economy comes at an inopportune moment for President Xi Jinping, who is poised to secure a precedent-breaking third leadership term at a once-in-five-years congress of the Communist Party later this year.

Of particular concern, youth unemployment has remained stubbornly high, reaching a record 19.9% in July, while the nationwide survey-based jobless rate has eased slightly but remains elevated at 5.4%.

On Tuesday, Premier Li Keqiang said that Beijing will step up policy support for the economy and take more steps to spur consumption and investment.

Even then, some analysts said modest rate cuts may only help at the margin if companies and consumers remain wary of taking on more debt. New bank lending in China in July fell more than expected and was less than a quarter of the level in June.

SHAKY RECOVERY

China’s leaders have recently downplayed the necessity of hitting the government’s annual growth target of “around” 5.5%, which was widely seen as out of reach.

With no sign that the government is easing its tough “zero-COVID” policy, some private economists expect the economy to grow by about 3% this year, which would be the slowest since 1976 excluding the 2.2% expansion in 2020, during the initial COVID outbreak.

But while Chinese policymakers may quietly accept lower growth without publicly revising the target, they have stressed they still want to achieve the “best possible results”, counting on fiscal policy measures — particularly infrastructure spending — to spur activity in a politically sensitive year, policy insiders said.

“Monetary policy will be relatively loose to support growth, but the room will be limited,” Xu Hongcai, deputy director of the economic policy commission at the state-backed China Association of Policy Science, told Reuters.

INFLATION WORRIES

Meanwhile, signs of consumer inflation pressures – long benign in China – are beginning to emerge.

The July consumer price index (CPI) increased 2.7% from a year earlier, the fastest pace since July 2020, even as activity cooled. While CPI is still within the official comfort zone, the central bank has recently forecast that price rises may breach the official threshold of 3% in coming months and warned against complacency.

In its second-quarter policy implementation report published last week, the PBOC said China should learn a lesson from the “misjudgment” of Western central banks on soaring inflation.

“In the short term, China’s structural inflation pressure may increase, import inflation pressure still exists, and the price rise may rebound in stages due to multiple factors. We should not take it lightly,” the central bank said.

Still, most economists don’t believe inflation is creating a big headache for policymakers for now, given weak demand.

“Although we face rising inflation due to internal and external factors, this is not the main danger,” Yu said.

($1 = 6.7745 Chinese yuan renminbi)

(Reporting by Kevin Yao; Editing by Kim Coghill)

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By Medha Singh and Aishwarya Nair

(Reuters) -Bed Bath & Beyond Inc shares nosedived late in the session on Wednesday from a 45% surge earlier after investor and GameStop Chairman Ryan Cohen filed for a proposed sale of his stake in the struggling home goods retailer.

The highly shorted shares continued their fall after the bell and were down more than 15% as Cohen’s venture capital firm RC Ventures, the second largest investor, said it intends to sell 9.45 million shares, including options, through JP Morgan Securities.

The company said it reached an agreement with RC Ventures in March and is working with financial advisors and lenders to strengthen its balance sheet as it struggles with declining revenue and liquidity concerns.

It will provide more information in an update by the end of this month.

Cohen did not respond to a request for comment. His venture capital firm had on Tuesday bought call options expiring in January 2023 on 1.67 million shares with a strike price ranging from $60 to $80.

Cohen’s bets led to the highest single-day purchase of the BBBY shares in at least five years, with individual investors dabbling in highly shorted shares buying $73.2 million worth of the company’s shares in the previous session.

On Wednesday too, Bed Bath & Beyond was the most actively traded single stock option, far ahead of popular options trades including Apple Inc and Tesla Inc, data from Options Clearing Corp showed.

The resurgence in retail trading comes after a rebound in U.S. stocks that helped the S&P 500 recoup more than half of the benchmark index’s losses since its June low.

Bed Bath & Beyond has been gaining in 14 out of the last 15 sessions, helping its market value rise fourfold to more than $2 billion.

On Wednesday, the shares rose up to $30 and closed down at $23.08. The stock had lost more than 60% of its value in June and July.

“It truly is a quality company (but) shares are probably overvalued in the low teens and it is ridiculously overvalued at high $20s,” said Jake Dollarhide, chief executive at Longbow Asset Management in Tulsa, Oklahoma.

About 55% of Bed Bath & Beyond’s free float is shorted, an increase of 19% in the past 30 days despite the price surge, according to S3 Partners.

“It’s possible for the meme rally to spread since there is a lot of short-term capital entering the market. We’ve seen the same with Chinese meme stocks over the past few weeks,” Siddharth Singhai, chief investment officer at New York-based hedge fund Ironhold Capital.

(Reporting by Medha Singh and Aishwarya Nair in Bengaluru, Additional reporting by Bansari Mayur Kamdar and Rachna Dhanrajani; Editing by Maju Samuel and Arun Koyyur)

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