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Commerce’s Raimondo on how the U.S. will spend $65 billion on broadband

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November 9, 2021

By David Shepardson

WASHINGTON (Reuters) – U.S. Commerce Secretary Gina Raimondo on Tuesday detailed plans to spend $65 billion to expand broadband access and affordability, a significant part of the Biden administration’s new infrastructure bill.

The bill’s authors say 19 million Americans lack access to high-speed internet. Raimondo said the administration’s goal is for “every single American” to have access to high-speed affordable broadband, “which means truly affordable.”

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The bill includes $42.45 billion in grants for expanding physical access to broadband, including building fiber or other networks.

The bill automatically awards $100 million to each state that can be used for technical assistance, to build out a state broadband office or other efforts, for a total of $5 billion.

The rest of the $42 billion will be allocated by Raimondo’s agency to states using a formula-based grant program, and all recipients of funding must offer a low-cost plan.

“Show us a plan that guarantees every single person in your state has access to high-speed affordable internet,” Raimondo said. Projects must meet a minimum speed requirement of 100/20 megabits per second.

She said it will take some months to get money to states and that it will come only after states submit plans that are approved by the department.

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All recipients must offer a low-cost plan and states must address all of their unserved areas before they are able to fund deployment projects in underserved areas. “We have to make sure we don’t spend this money overbuilding,” Raimondo said.

She stressed that Americans would not see this spending right away in their communities. “We want to get this right. It’s more important to get this right than to rush…. Not everybody’s going to have broadband a year from now.”

Biden initially proposed $100 billion for broadband and the White House conceded in May https://www.reuters.com/technology/white-house-would-back-smaller-broadband-internet-boost-2021-05-21/#:~:text=President%20Joe%20Biden%20in%20April%20called%20for%20%24100,said%20Friday%20in%20a%20memo%20to%20Senate%20Republicans that with $65 billion, it would take longer to extend access to all Americans.

AT&T CEO John Stankey said the government funds will pave the way “for universal connectivity to unserved areas, making broadband affordable for low-income households, and providing more resources for digital equity and adoption.” 

Comcast said the funding appropriately focuses “on getting broadband infrastructure first to areas where it does not currently exist, while at the same time continuing to promote faster speeds and disincentivizing duplicative projects.”

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The new infrastructure bill also includes $14.2 billion for the Federal Communications Commission to provide a new permanent $30 per month voucher for low-income families to use toward any internet service plan of their choosing.

It expands on a $3.2 billion temporary COVID-19 pandemic program called the Emergency Broadband Benefit that is currently used by nearly 7.4 million U.S. households and provides a $50-a- month subsidy. The new program expands eligibility to more low-income households.

Minority and low-income households are less likely to have home internet, a Pew Research survey this year found. Fewer than 60% of adults with annual household income under $30,000 have home internet, according to the survey.

As the government spends the billions funded in the bill, Raimondo vowed it would be transparent. “Every single state plan is going to have to be put online, so you can comb through every detail of every plan,” she said.

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(Reporting by David Shepardson; Editing by Heather Timmons and Dan Grebler)

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Investors brace for potential hit to earnings because of Omicron

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December 6, 2021

By Caroline Valetkevitch

NEW YORK (Reuters) – As details of a new COVID-19 variant emerge, investors are bracing for a potential hit to U.S. corporate earnings, particularly among retailers, restaurants and travel companies.

News of the Omicron variant comes in the middle of the holiday shopping period, and many businesses are already struggling with higher inflation and supply chain snags because of the pandemic.

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That is putting the focus again on these companies affected by the reopening of the economy, said Kristina Hooper, chief global market strategist at Invesco in New York.

“Are we still going to see traffic into restaurants and retailers, or at least retailers that derive most of their revenue from in-store traffic as opposed to online?” she said. “The other area of vulnerability of course is supply chain disruptions.”

She and other strategists said it’s too early to tell the extent to which the variant could affect earnings.

The Omicron variant that captured global attention in South Africa less than two weeks ago has spread to about one-third of U.S. states, but the Delta version accounts for the majority of COVID-19 infections as cases rise nationwide, U.S. health officials said on Sunday.

Goldman Sachs on Saturday cited risks and uncertainty around the emergence of the Omicron variant as it cut its outlook for U.S. economic growth to 3.8% for 2022. While the variant could slow economic reopening, the firm expects “only a modest drag” on service spending, it said in a note.

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U.S. companies have just wrapped up a much stronger-than-expected third-quarter earnings season, and the rate of fourth-quarter earnings year-over-year growth has been expected to be well below the previous quarter’s.

Analysts see fourth-quarter S&P 500 earnings up 21.6% from the year-ago quarter, while third-quarter earnings growth was at about 43%, according to IBES data from Refinitiv.

That fourth-quarter forecast has not changed since Nov. 26, just after the new variant became headline news.

Omicron may be affecting travel plans. Airline shares have already come under pressure, with the NYSE Arca airline index down 8.3% since the close of the session before Nov. 26.

For companies, “the significance of the impact will depend on how long the Omicron measures last,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “There will be some short-term impact… It’ll surely cause some short-term disruption to travel.”

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Colin Scarola, a vice president of equity research at CFRA, wrote in a Dec. 2 note on the airline sector that while details of the variant are still emerging, trends in U.S. air travel over recent months with the Delta variant may give some insight into what could happen to travel under the Omicron variant.

“This recent history tells us that most people have already accepted the material risk of infection with a Covid-19 variant when fully vaccinated. But knowing that risk of severe illness remains very low, they’ve been comfortable flying on airplanes,” he wrote.

Compounding concerns about the 2022 earnings outlook are higher costs for companies, with Federal Reserve Chair Jerome Powell last week signaling that inflation risks are rising and numerous companies citing rising costs during the third-quarter earnings season.

Even before the Omicron news, Tuz said investors were reading “more and more about inflation and wages and other inputs,” and that was expected to continue into 2022.

“I don’t know if the ability to pass along these higher costs is going to exist as much,” he said.

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(Reporting by Caroline Valetkevitch; Editing by Alden Bentley and Nick Zieminski)

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Bank investment chiefs signal China and emerging market caution

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December 6, 2021

LONDON (Reuters) -Market volatility and uncertainty over China’s indebted property sector is making bank investment chiefs cautious about its assets, amid more general nervousness about broader emerging markets.

“I would take a wait-and-see approach on emerging markets,” Credit Suisse global chief investment officer Michael Strobaek told the Reuters annual Investment Outlook Summit.

“I would take a day-by-day, week-by-week approach to China, to see what’s unfolding on the default side and the policy side,” he said, referring to problems in the country’s giant corporate debt sector.

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“Only if I see real deep opportunities, I’d go back in.”

Willem Sels, Global CIO, Private Banking & Wealth Management, HSBC, said clients needed to take a longer term view on emerging markets after many were hurt by recent volatility.

“We have a neutral view on China, we try to diversify,” he said.

“We try to get the confidence of investing in China. We try to align ourselves with what is clear in terms of government policy, and that’s the net zero transmission.”

Investors can still “find some winners” in China by digging down into areas like green tech and 5G-related businesses where the government was showing significant support, said Mark Haefele, CIO at UBS Global Wealth Management.

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(Reporting by Tommy Wilkes, Sujata Rao and Dhara Ranasinghe; Editing by Alexander Smith)

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IMF says euro zone should keep supporting economy, high inflation is temporary

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December 6, 2021

BRUSSELS (Reuters) – Euro zone governments should continue to spend to support the COVID-19 economic recovery, though in an increasingly focused way, and consolidate public finances only when it is firmly under way, the International Monetary Fund said on Monday.

In a regular report on the euro zone economy presented to the group’s finance ministers, the IMF noted, however, that while consolidation itself could wait, a credible way of how it would be done in the future should be announced already now.

“Policies should remain accommodative but become increasingly targeted, with a focus on mitigating potential rises in inequality and poverty,” the IMF said.

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“Fiscal policy space should be rebuilt once the expansion is firmly underway, but credible medium-term consolidation plans should be announced now,” it said.

The Fund also noted that the rise in inflation, which hit a record high of 4.9% on a year-on-year basis in November, was temporary and, therefore, not a big threat because it did not translate into a spike in wages, called a second-round effect.

“Recent inflation readings have surprised on the upside, but much of the increase still appears transitory, with large second-round effects unlikely,” the report said, adding that the European Central Bank’s monetary policy should therefore continue to be accommodative.

“Structural reforms and high-impact investment, including in climate-friendly infrastructure and digitalization, remain crucial to enhancing resilience and boosting potential growth,” the IMF said.

(Reporting by Jan Strupczewski; Editing by Paul Simao)

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