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January 7, 2023 – rdspinvestments

January 7, 2023

Ant Group founder Jack Ma to give up control in key revamp

Ant Group founder Jack Ma to give up control in key revamp© Reuters. FILE PHOTO: Jack Ma, founder and executive chairman of China’s Alibaba Group, speaks in front of a picture of SoftBank’s human-like robot named ‘pepper’ during a news conference in Chiba, Japan, June 18, 2015. REUTERS/Yuya Shino/File Photo/File Photo

By Yingzhi Yang, Brenda Goh and Kane Wu

SHANGHAI/HONG KONG (Reuters) -Ant Group’s founder Jack Ma will give up control of the Chinese fintech giant in an overhaul that seeks to draw a line under a regulatory crackdown that was triggered soon after its mammoth stock market debut was scuppered two years ago.

Ant’s $37 billion IPO, which would have been the world’s largest, was cancelled at the last minute in November 2020, leading to a forced restructuring of the financial technology firm and speculation the Chinese billionaire would have to cede control.

While some analysts have said a relinquishing of control could clear the way for the company to revive its IPO, the changes announced by the group on Saturday, however, are likely to result in a further delay due to listing regulations.

China’s domestic A-share market requires companies to wait three years after a change in control to list. The wait is two years on Shanghai’s Nasdaq-style STAR market, and one year in Hong Kong.

A former English teacher, Ma previously possessed more than 50% of voting rights at Ant but the changes will mean that his share falls to 6.2%, according to Reuters calculations.

Ma only owns a 10% stake in Ant, an affiliate of e-commerce giant Alibaba (NYSE:) Group Holding Ltd, but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.

Hangzhou Yunbo, an investment vehicle for Ma, had control over two other entities that own a combined 50.5% stake of Ant, the prospectus showed.

Ma’s ceding of control comes as Ant is nearing the completion of its two-year regulatory-driven restructuring, with Chinese authorities poised to impose a fine of more than $1 billion on the firm, Reuters reported in November.

The expected penalty is part of Beijing’s sweeping and unprecedented crackdown on the country’s technology titans over the past two years that has sliced hundreds of billions of dollars off their values and shrunk revenues and profits.

But Chinese authorities have in recent months softened their tone on the tech crackdown amid efforts to bolster a $17-trillion economy that has been badly hurt by the COVID-19 pandemic.

“With the Chinese economy in a very febrile state, the government is looking to signal its commitment to growth, and the tech, private sectors are key to that as we know,” said Duncan Clark, chairman of investment advisory firm BDA China.

“At least Ant investors can (now) have some timetable for an exit after a long period of uncertainty,” said Clark, who is also an author of a book on Alibaba and Ma.

REGULATORY SCRUTINY

Ant operates China’s ubiquitous mobile payment app Alipay, the world’s largest, which has more than 1 billion users.

Ant, whose businesses also span consumer lending and insurance products distribution, said Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising voting rights, and would only vote independently.

It added that the shareholders’ economic interests in Ant will not change as a result of the adjustments.

Ant also said it would add a fifth independent director to its board so that independent directors will comprise a majority of the company’s board. It currently has eight board directors.

“As a result, there will no longer be a situation where a direct or indirect shareholder will have sole or joint control over Ant Group,” it said in its statement.

Reuters reported in April 2021 that Ant was exploring options for Ma, one of China’s most successful and influential businessmen, to divest his stake in Ant and give up control.

The Wall Street Journal reported in July last year, citing unnamed sources, that Ma could cede control by transferring some of his voting power to Ant officials including Chief Executive Officer Eric Jing.

Ant’s market listing in Hong Kong and Shanghai was derailed days after Ma publicly criticised regulators in a speech in October 2020. Since then, his sprawling empire has been under regulatory scrutiny and going through a restructuring.

Once outspoken, Ma has largely remained out of public view since the regulatory crackdown that has reined in the country’s technology giants and did away with a laissez-faire approach that drove breakneck growth.

“Jack Ma’s departure from Ant Financial, a company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors,” said Andrew Collier, managing director of Orient Capital Research.

“This trend will continue the erosion of the most productive parts of the Chinese economy.”

As Chinese regulators frown on monopolies and unfair competition, Ant and Alibaba have been untangling their operations from each other and independently seeking new business, Reuters reported last year.

Ant said on Saturday that its management would no longer serve in the Alibaba Partnership a body that can nominate the majority of the e-commerce giant’s board, affirming a change that started mid-last year.

Eisai, Biogen get U.S. FDA approval for Alzheimer’s drug, apply for full approval

Eisai, Biogen get U.S. FDA approval for Alzheimer's drug, apply for full approval© Reuters. FILE PHOTO: The logo of Eisai Co Ltd is displayed at the company headquarters in Tokyo, Japan, March 8, 2018. REUTERS/Issei Kato

By Julie Steenhuysen and Deena Beasley

(Reuters) -The U.S. Food and Drug Administration on Friday approved the Alzheimer’s drug lecanemab developed by Eisai Co (OTC:) Ltd and Biogen Inc (NASDAQ:) for patients in the earliest stages of the mind-wasting disease.

Eisai and Biogen said on Saturday the Japanese drugmaker had applied for full FDA approval of the drug.

The drug, to be sold under the brand Leqembi, belongs to a class of treatments that aim to slow the advance of the neurodegenerative disease by removing sticky clumps of the toxic protein beta amyloid from the brain.

Nearly all previous experimental drugs using the same approach had failed.

“Today’s news is incredibly important,” said Dr. Howard Fillit, chief science officer of the Alzheimer’s Drug Discovery (NASDAQ:) Foundation. “Our years of research into what is arguably the most complex disease humans face is paying off and it gives us hope that we can make Alzheimer’s not just treatable, but preventable.”

Eisai said the drug would launch at an annual price of $26,500. Biogen shares, which had been halted, were up 3% at $279.40.

The Japanese company said it also planned to apply for marketing authorization for Leqembi in Japan and the European Union by the end of its business year on March 31, with hope of winning an approval from the Japanese authority by the end of this year.

Eisai estimated the number of U.S. patients eligible for the drug would reach around 100,000 within three years, increasing gradually from there over the medium to long term.

“Our assumption is that the number of global patients eligible for the drug will grow to around 2.5 million by around 2030,” Eisai CEO Haruo Naito told reporters and analysts on Saturday in Tokyo.

“The new drug may not generate a significant profit immediately after the launch, but it will start contributing to our profit in the latter half of the second year or the third year,” he said without giving any concrete figure.

Dr. Erik Musiek, A Washington University neurologist at Barnes-Jewish Hospital, said he was “pleasantly surprised” by the drug’s price.

“Considering the marketplace and the fact that we have no other good disease-modifying treatments, I think it’s in the ballpark of what I would expect,” he said.

Initial patient access will be limited by a number of factors including reimbursement restrictions by Medicare, the U.S. government insurance program for Americans aged 65 and older who represent some 90% of individuals likely to be eligible for Leqembi.

“Without Centers for Medicare & Medicaid Services (CMS) and insurance coverage … access for those who could benefit from the newly-approved treatment will only be available to those who can pay out-of-pocket,” the Alzheimer’s Association said in a statement.

Leqembi was approved under the FDA’s accelerated review process, an expedited pathway that speeds access to a drug based on its impact on underlying disease-related biomarkers believed to predict a clinical benefit.

“This treatment option is the latest therapy to target and affect the underlying disease process of Alzheimer’s instead of only treating the symptoms of the disease,” FDA neuroscience official Billy Dunn said in a statement.

CMS said on Friday that current coverage restrictions for drugs approved under the accelerated pathway could be reconsidered based on its ongoing review of available information.

If the drug receives traditional FDA approval, CMS said it would provide broader coverage. Eisai officials have said the company plans to submit data from a recent successful clinical trial in 1,800 patients as the basis for a full standard review of Leqembi.

The CMS decision was largely in response to a previous Alzheimer’s treatment from Eisai and Biogen. Aducanumab, sold under the brand name Aduhelm, won accelerated approval in 2021 with little evidence that the drug slowed cognitive decline and despite objections by the FDA’s outside experts.

Biogen initially priced Aduhelm at $56,000 per year before cutting the price in half. With limited acceptance and insurance coverage, sales were only $4.5 million in the first nine months of 2022.

Lecanemab is intended for patients with mild cognitive impairment or early Alzheimer’s dementia, a population that doctors believe represents a small segment of the estimated 6 million Americans currently living with the memory-robbing illness.

To receive the treatment, patients will need to undergo testing to show they have amyloid deposits in their brain – either through brain imaging or a spinal tap. They will also need to undergo periodic MRI scans to monitor for brain swelling, a potentially serious side effect associated with this type of drug.

The medicine’s label says doctors should exercise caution if lecanemab patients are given blood clot preventers. This could be a safety risk, according to an autopsy analysis published this week of a lecanemab patient who had a stroke and later died.

In the large trial of lecanemab, which is given by infusion, the drug slowed the rate of cognitive decline in patients with early Alzheimer’s by 27% compared to a placebo. Nearly 13% of patients treated with Leqembi in the trial had brain swelling.

Dr. Babak Tousi, a neuro-geriatrician at the Cleveland Clinic, said the approval will make a “big difference” in the field because it is based on biomarkers rather than just symptoms.

“It’s going to change how we make a diagnosis for Alzheimer’s disease, with more accuracy,” he said.

Tousi acknowledged that the benefit of the drug will likely be modest. “Still, it is a benefit that we were not able to achieve” before this approval.

China’s ‘great migration’ kicks-off under shadow of COVID

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China's 'great migration' kicks-off under shadow of COVID© Reuters. Passengers arriving on international flights wait in line next to a staff member wearing personal protective equipment (PPE) at the airport in Chengdu, China January 6, 2023. REUTERS/Staff

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By Casey Hall

SHANGHAI (Reuters) -China on Saturday marked the first day of “chun yun”, the 40-day period of Lunar New Year travel known pre-pandemic as the world’s largest annual migration of people, bracing for a huge increase in travellers and the spread of COVID-19 infections.

This Lunar New Year public holiday, which officially runs from Jan. 21, will be the first since 2020 without domestic travel restrictions.

Over the last month China has seen the dramatic dismantling of its “zero-COVID” regime following historic protests against a policy that included frequent testing, restricted movement, mass lockdowns and heavy damage to the world’s No.2 economy.

Investors are hoping that the reopening will eventually reinvigorate a $17-trillion economy suffering its lowest growth in nearly half a century.

But the abrupt changes have exposed many of China’s 1.4 billion population to the virus for the first time, triggering a wave of infections that is overwhelming some hospitals, emptying pharmacy shelves of medicines and causing long lines to form at crematoriums.

The Ministry of Transport said on Friday that it expects more than 2 billion passengers to take trips over the next 40 days, an increase of 99.5% year-on-year and reaching 70.3% of trip numbers in 2019.

There was mixed reaction online to that news, with some comments hailing the freedom to return to hometowns and celebrate the Lunar New Year with family for the first time in years.

Many others, however, said they would not travel this year, with worry of infecting elderly relatives a common theme.

“I dare not go back to my hometown, for fear of bringing the poison back,” said one such comment on the Twitter-like Weibo (NASDAQ:).

There are widespread concerns that the great migration of workers in cities to their hometowns will cause a surge in infections in smaller towns and rural areas that are less well-equipped with ICU beds and ventilators to deal with them.

Authorities say they are boosting grassroots medical services, opening more rural fever clinics and instituting a “green channel” for high risk patients, especially elderly people with underlying health conditions, to be transferred from villages directly to higher level hospitals.

“China’s rural areas are wide, the population is large, and the per capita medical resources are relatively insufficient,” National Health Commission spokesman Mi Feng said on Saturday.

“It’s necessary to provide convenient services, accelerate vaccination for the elderly in rural areas and the construction of grassroots lines of defense.”

INFECTION PEAK REACHED

Some analysts are now saying the current wave of infections may have already peaked.

Ernan Cui, an analyst at Gavekal Dragonomics in Beijing, cited several online surveys as indicating that rural areas were already more widely exposed to COVID infections than initially thought, with an infection peak already reached in most regions, noting there was “not much difference between urban and rural areas.”

On Sunday China will reopen its border with Hong Kong and will also end a requirement for travellers coming from abroad to quarantine. That effectively opens the door for many Chinese to travel abroad for the first time since borders slammed shut nearly three years ago, without fear of having to quarantine on their return.

Jillian Xin, who has three children and who lives in Hong Kong, said she was “incredibly excited” about the border opening, especially as it means seeing family in Beijing more easily.

“For us, the border opening means my kids can finally meet their grandparents for the first time since the pandemic began,” she said. “Two of our children have never been able to see their grandpa, so we cannot wait for them to meet.”

China’s surge in cases has caused concern internationally and more than a dozen countries are now demanding COVID tests from travellers from China. The World Health Organisation said on Wednesday that China’s COVID data underrepresents the number of hospitalisations and deaths from the disease.

Chinese officials and state media have defended the handling of the outbreak, playing down the severity of the surge and denouncing foreign travel requirements for its residents.

On Saturday in Hong Kong, people who had made appointments had to queue for about 90 minutes at a centre for PCR tests needed for travel to countries including mainland China.

TREATMENT TO THE FORE

For much of the pandemic, China poured resources into a vast PCR testing program to track and trace COVID-19 cases, but the focus is now shifting to vaccines and treatment.

In Shanghai, for example, the city government on Friday announced an end to free PCR tests for residents from Jan. 8.

A circular published by four government ministries Saturday signalled a reallocation of financial resources to treatment, outlining a plan for public finances to subsidise 60% of treatment costs until March 31.

Meanwhile, sources told Reuters that China is in talks with Pfizer Inc (NYSE:) to secure a licence that will allow domestic drugmakers to manufacture and distribute a generic version of the U.S. firm’s COVID antiviral drug Paxlovid in China.

Many Chinese have been attempting to buy the drug abroad and have it shipped to China.

On the vaccine front, China’s CanSino Biologics Inc announced it has begun trial production for its COVID mRNA booster vaccine, known as CS-2034.

China has relied on nine domestically-developed vaccines approved for use, including inactivated vaccines, but none have been adapted to target the highly-transmissible Omicron variant and its offshoots currently in circulation.

The overall vaccination rate in the country is above 90%, but the rate for adults who have had booster shots drops to 57.9%, and to 42.3% for people aged 80 and older, according to government data released last month.

China reported three new COVID deaths in the mainland for Friday, bringing its official virus death toll since the pandemic began to 5,267, one of the lowest in the world.

International health experts believe Beijing’s narrow definition of COVID deaths does not reflect a true toll, and some predict more than a million deaths this year.

Slowing wages no white flag for Fed hawkishness as labor market still too tight

Slowing wages no white flag for Fed hawkishness as labor market still too tight© Reuters.

By Yasin Ebrahim

Investing.com — delivered a rip-roaring rally, racking up a win for the first week of trading for year. Evidence of a still tight labor market was largely brushed aside as the slowdown in wage growth dominated attention. But as investors chalk the jobs report down as a win for the Fed and a win for less hawkish monetarily policy, some on Wall Street caution against getting carried away.

“When you combine the [labor shortage] with some slowing economic growth, but still strong demand for services … that’s going to make this [economic] cycle different than previous cycles,” Brian Mulberry, client portfolio manager at Zacks Investment Management told Investing.com’s Yasin Ebrahim in an interview on Friday.

“The strong labour market will prevent the Fed from providing relief to the economy in the form of lower interest rates that most people are expecting,” Mulberry added.

The economy created 223,000 jobs last month, above economists’ estimates of 200,000. Average hourly earnings fell more than expected to 4.6%, stoking hopes that the Fed is winning in its battle against inflation and may soon lay down its hawkish weaponry.

“The wage data this [Friday] morning seems to have caused the market to reverse course [on pricing in higher rates], Jefferies said.  Fed funds futures showed bets on the peak level of rates slipped below 5% following the data, while a rate cut at year-end continues to be priced in.

The 223,000 jobs created in December took average jobs gains over the prior three months to about 247,000 per month. This pace of job growth, if sustained, could wipe out the remaining supply of workers is just four months, Jefferies says, estimating the slack in the labor market at about 1.5 million workers.

To avoid an inevitable acceleration in wages, employment growth will have to slow significantly. But labor market data this week showing there was still nearly twice as many openings for each job seeker in November, suggests this red-hot labor market will continue, prolonging the Federal Reserve’s war against inflation for longer than many expect.

“Either employment growth has to slow significantly from here, or the labor market will continue to tighten and wage pressures will continue to intensify,” Jefferies added. “We are still leaning toward the latter scenario.”

Others agree, pointing to the tight labor market as a key risk that will extend the Fed’s tightening cycle.

“While this strong print today does not change our expectation of a step down to 25bps at the upcoming FOMC, continued robust jobs growth increases the risks of an extension of the tightening cycle beyond the next meeting,” Morgan Stanley said in a note.

Some investors intent on continuing the game of chicken against the Fed – by betting on a Fed pivot despite the central bank insisting that it will stay the hawkish course – point to a slump in short-term Treasury yields as evidence that the Fed will relent and abandoned its hawkish policy.   

But the Fed’s minutes from its December showed that no members were expecting a rate cuts this year. It also flagged concerns about “unwarranted easing in financial conditions,” especially if driven by the “misperception” from markets of a sooner rather than later pivot, that would complicate the Fed’s fight against inflation.

“When you see the shorter end of the yield curve inverted the way that it is now, a lot of people will say that means in six to nine months, interest rates will have to come down,” Mulberry said.

“That has happened historically and is an accurate assessment, but in the minutes from the Fed’s December meeting [released] this week, it was unanimous from the whole voting member of the FOMC that they are going to keep interest rates high all year long.” Mulburry added.

Tesla owners in China protest against surprise price cuts they missed

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Tesla owners in China protest against surprise price cuts they missed© Reuters. People protest at a Tesla showroom in Chengdu, Sichuan, China, released January 6, 2023 in this picture obtained by Reuters from social media. /via REUTERS

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SHANGHAI (Reuters) -Hundreds of Tesla (NASDAQ:) owners gathered at the automaker’s showrooms and distribution centres in China over the weekend, demanding rebates and credit after sudden price cuts they said meant they had overpaid for electric cars they bought earlier.

On Saturday, about 200 recent buyers of the Tesla Model Y and Model 3 gathered at a Tesla delivery centre in Shanghai to protest against the U.S. carmaker’s decision to slash prices for the second time in three months on Friday.

Many said they had believed that prices Tesla charged for its cars late last year would not be cut as abruptly or as deeply as the automaker just announced in a move to spur sales and support production at its Shanghai plant. The scheduled expiration of a government subsidy at the end of 2022 also drove many to finalize their purchases.

Videos posted on social media showed crowds at Tesla stores and delivery centres in other Chinese cities from Chengdu to Shenzhen, suggesting wider consumer backlash.

After Friday’s surprise discounts, Tesla’s EV prices in China are now between 13% and 24% below their September levels.

Analysts have said Tesla’s move was likely to boost its sales, which tumbled in December, and force other EV makers to cut prices too at a time of faltering demand in the world’s largest market for battery-powered cars.

While established automakers often discount to manage inventory and keep factories running when demand weakens, Tesla operates without dealerships and transparent pricing has been part of its brand image.

“It may be a normal business practice but this is not how a responsible enterprise should behave,” said one Tesla owner protesting at the company’s delivery centre in Shanghai’s Minhang suburb on Saturday who gave his surname as Zhang.

He and the other Tesla owners, who said they had taken delivery in the final months of 2022, said they were frustrated with the abruptness of Friday’s price cut and Tesla’s lack of an explanation to recent buyers.

Zhang said police facilitated a meeting between Tesla staff and the assembled owners at which the owners handed over a list of demands, including an apology and compensation or other credits. He added the Tesla staff had agreed to respond by Tuesday.

About a dozen police officers could be seen at the Shanghai protest and most of the videos of the other demonstrations also showed a large police presence at the Tesla sites.

Protests are not a rare occurrence in China, which has over the years seen people come out in large numbers over issues such as financial or property scams, but authorities have been on higher alert after widespread protests in Chinese cities and top universities at the end of November against COVID-19 restrictions.

‘RETURN THE MONEY’

Other videos appearing to be of Tesla owners protesting were also posted to Chinese social media platforms on Saturday.

One video, which Reuters verified was filmed at a Tesla store in the southwestern city of Chengdu, showed a crowd chanting, “Return the money, refund our cars.”

Another, which appeared to be filmed in Beijing, showed police cars arriving to disperse crowds outside a Tesla store.

Reuters was unable to verify the content of either video.

Tesla does not plan to compensate buyers who took delivery before the most recent price cut, a spokesman for Tesla China told Reuters on Saturday.

He did not respond when asked to comment on the protests.

China accounted for about a third of Tesla’s global sales in 2021 and its Shanghai factory, which employs about 20,000 workers, is its single most productive and profitable plant.

Analysts have been positive about the potential for Tesla’s price cuts to drive sales growth at a time when it is a year from announcing its next new vehicle, the Cybertruck.

“Nowhere else in the world is Tesla faced with the kind of competitors that they have here [in China],” said Bill Russo, head of consultancy Automobility Ltd in Shanghai.

“They are in a much bigger EV market with companies that can price more aggressively than they can, until now.”

In 2021, Tesla faced a public relations storm after an unhappy customer climbed on a car at the Shanghai auto show to protest against the company’s handling of her complaints about her car’s brakes.

Tesla responded by apologising to Chinese consumers for not addressing the complaints in a timely way.

Russia’s war on Ukraine latest: Kyiv says it repels attacks in east

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Russia's war on Ukraine latest: Kyiv says it repels attacks in east© Reuters. FILE PHOTO: Vlad from the 80th Separate Air Assault Brigade drives an APC on the front line at Orthodox Christmas, during a ceasefire announced by Russia over the Orthodox Christmas period, from the frontline region of Kreminna, Ukraine, January 6, 2023.

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(Reuters) – Ukraine is strengthening its forces in the eastern Donbas region and repelling constant attacks on Bakhmut and other towns there by Russian mercenary group Wagner, Ukrainian authorities said on Monday.

FIGHTING:

Ukrainian forces are repelling constant attacks on the town of Bakhmut in the eastern Donbas region and holding their positions in nearby Soledar in very difficult conditions, President Volodymyr Zelenskiy said on Sunday.

* A Russian missile attack on the Ukrainian city of Kramatorsk missed its targets and there were no obvious signs of casualties, a Reuters reporter said on Sunday. Moscow had claimed the strike killed 600 Ukrainian soldiers in retaliation for a Ukrainian strike that killed scores of Russians on New Year’s Eve. The Kremlin said it was confident the Russian military’s account was correct.

* Two women were killed and several other people were wounded in a Russian missile strikeon a market in the village of Shevchenkove in eastern Ukraine on Monday, the regional governor said.

DIPLOMACY

* The Kremlin said new Western deliveries of armoured vehicles to Ukraine would deepen suffering. France, Germany and the United States all announced new plans last to send armoured vehicles to Ukraine.

* Russia and Ukraine each returned 50 captured soldiers in the latest prisoner swap in the war. Ukraine said the returnees included fighters from Mariupol and Chernobyl. Freed Ukrainian’s sang the national anthem on their release.

* Russia and Belarus will hold joint aviation drills of the air divisions that are part of the two countries’ regional grouping of troops. The drills will last from Jan. 16 to Feb. 1.

* Justice ministers from around the world will gather in London in March to boost international support for the International Criminal Court in its investigations of alleged war crimes in Ukraine, the British government said.

Kevin McCarthy elected Republican U.S. House speaker, but at a cost

Kevin McCarthy elected Republican U.S. House speaker, but at a cost© Reuters. FILE PHOTO: The chair of the Speaker of the House sits empty for a third straight day as members of the House gather for another expected round of voting for a new Speaker on the third day of the 118th Congress at the U.S. Capitol in Washington, U.S., Jan

By David Morgan, Moira Warburton and Andy Sullivan

WASHINGTON (Reuters) -Republican Kevin McCarthy was elected speaker of the U.S. House of Representatives early on Saturday, after making extensive concessions to right-wing hardliners that raised questions about the party’s ability to govern.

The 57-year-old Californian suffered one final humiliation when Representative Matt Gaetz withheld his vote on the 14th ballot as midnight approached, prompting a scuffle in which fellow Republican Mike Rogers (NYSE:) had to be physically pulled away.

McCarthy’s victory in the 15th ballot ended the deepest congressional dysfunction in over 160 years. But it sharply illustrated the difficulties he will face in leading a narrow and deeply polarized majority.

He won at last on a margin of 216-212. He was able to be elected with the votes of fewer than half the House members only because six in his own party withheld their votes – not backing McCarthy as leader, but also not voting for another contender.

As he took the gavel for the first time, McCarthy represented the end of President Joe Biden’s Democrats’ hold on both chambers of Congress.

“Our system is built on checks and balances. It’s time for us to be a check and provide some balance to the president’s policies,” McCarthy said in his inaugural speech, which laid out a wide range of priorities from cutting spending to immigration, to fighting culture war battles.

McCarthy was elected only after agreeing to a demand by hardliners that any lawmaker be able call for his removal at any time. That will sharply cut the power he will hold when trying to pass legislation on critical issues including funding the government, addressing the nation’s looming debt ceiling and other crises that may arise.

Republicans’ weaker-than-expected performance in November’s midterm elections left them with a narrow 222-212 majority, which has given outsized power to the right-wingers who opposed McCarthy’s leadership.

Those concessions, including sharp spending cuts and other curbs on McCarthy’s powers, could point to further turbulence in the months ahead, especially when Congress will need to sign off on a further increase of the United States’ $31.4 trillion borrowing authority.

Over the past decade, Republicans have repeatedly shut down much of the government and pushed the world’s largest borrower to the brink of default in efforts to extract steep spending cuts, usually without success.

Several of the hardliners have questioned McCarthy’s willingness to engage in such brinkmanship when negotiating with Biden, whose Democrats control the Senate. They have raged in the past when Senate Republicans led by Mitch McConnell agreed to compromise deals.

The hardliners, also including Freedom Caucus Chairman Scott Perry of Pennsylvania and Chip Roy of Texas, said concessions they extracted from McCarthy will make it easier to pursue such tactics – or force another vote on McCarthy’s leadership if he does not live up to their expectations.

“You have changes in how we’re going to spend and allocate money that are going to be historic,” said Perry.

“We don’t want clean debt ceilings to just go through and just keep paying the bill without some counteracting effort to control spending when the Democrats control the White House and control the Senate.”

One of those Democrats, Senate Majority Leader Chuck Schumer, warned that the concessions McCarthy made to “the extremists” in his party may come back to haunt him, and made it more likely that the Republican-controlled House will cause a government shutdown or default with “devastating consequences.”

In a sharp contrast to the battles among House Republicans, Biden and McConnell appeared together in Kentucky on Wednesday to highlight investments in infrastructure.

McCarthy’s belated victory came the day after the two-year anniversary of a Jan. 6, 2021, attack on the U.S. Capitol, when a violent mob stormed Congress in an attempt to overturn then-President Donald Trump’s election loss.

This week’s 14 failed votes marked the highest number of ballots for the speakership since 1859, in the turbulent years before the Civil war.

McCarthy’s last bid for speaker, in 2015, crumbled in the face of right-wing opposition. The two previous Republican speakers, John Boehner and Paul Ryan, left the job after conflict with right-wing colleagues.

McCarthy now holds the authority to block Biden’s legislative agenda, force votes for Republican priorities on the economy, energy and immigration and move forward with investigations of Biden, his administration and his family.

CONCESSIONS

But the concessions he agreed to mean McCarthy will hold considerably less power than his predecessor, Democrat Nancy Pelosi. That will make it hard for him to agree to deals with Democrats in a divided Washington.

Allowing a single member to call for a vote to remove the speaker will give hardliners extraordinary leverage.

The agreement would cap spending for the next fiscal year at last year’s levels – amounting to a significant cut when inflation and population growth are taken into account.

That could meet resistance from more centrist Republicans or those who have pushed for greater military funding, particularly as the United States is spending billions of dollars to help Ukraine fend off a Russian assault.

Moderate Republican Brian Fitzpatrick said he was not worried that the House would effectively be run by hardliners.

“It’s aspirational,” he told reporters. “We still have our voting cards.”

Republican U.S. House Speaker Kevin McCarthy’s dream job could become a nightmare

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Republican U.S. House Speaker Kevin McCarthy's dream job could become a nightmare© Reuters. U.S. House Republican Leader Kevin McCarthy (R-CA) looks over at Rep. Patrick McHenry (R-NC) shortly after things became physical between Republican representatives on the floor of the House as the House of Representatives holds a late night 14th round of

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By David Morgan

WASHINGTON (Reuters) -Kevin McCarthy woke up on Saturday morning with a long-held dream fulfilled: After a four-day standoff, he was elected speaker of the U.S. House of Representatives, becoming the most powerful member of the Republican Party.

But that role could turn into a nightmare because it requires leading a caucus that strongly rejects leadership. Conservatives have regularly excoriated top Senate Republican Mitch McConnell for agreeing to compromises of any kind with Democrats and earlier this week rejected former President Donald Trump’s call to quickly fall in line behind McCarthy.

The 57-year-old Californian showed tenacity in pushing through 15 rounds of voting and dismantling what had been a cadre of 20 right-wing hardline opponents, finding compromises that would pull most of them into his camp. He told reporters on Friday night that he would be a more effective leader because of the drawn-out process.

“Because it took this long, now we’ve learned how to govern. So now we’ll be able to get the job done,” McCarthy said. “At the end of the day, we’re going to be more effective, more efficient and definitely government is going to be more accountable.”

McCarthy agreed to major concessions to secure a role that is second in line to the Oval Office behind Democratic Vice President Kamala Harris, including a rule that means that any of the 435 members of the House could force a vote for his removal at any time.

Republicans’ weaker-than-expected performance in the November elections left them with a narrow 222-212 majority and gives outsized power to a small group of right-wing hardliners. They railed against McCarthy, who served as minority leader since 2019, accusing him of being soft and too open to compromise with President Joe Biden and his Democrats, who also control the U.S. Senate.

“We do not trust Mr. McCarthy with power, because we know who he will use it for. And we are concerned that it will not be for the American people,” said Representative Matt Gaetz, who dealt McCarthy one final humiliation on Friday night when he cost him the second-to-last vote by withholding his support.

But compromise will be necessary in a divided government, and McCarthy’s concessions raise the risk that the two parties could fail to reach a deal when the federal government comes up against its $31.4 trillion debt limit later this year. Failure to reach agreement, or even a long standoff, could bring a default that would shake the global economy.

McCarthy shrugged off suggestions that the deal could weaken his power.

“That gives me no problem or concern whatsoever,” McCarthy told reporters, describing his deal with critics as a “very good” agreement that “empowers the members.”

CUTS TO SPENDING

He also agreed to pursue deep cuts in government spending to achieve a balanced federal budget in 10 years, beginning in October, and promised his hardline critics greater influence on key committees.

The week-long stalemate over his candidacy has emboldened individual lawmakers, at a time when the thin Republican majority affords him the loss of no more than four votes to enact legislation.

McCarthy has spent his adult life in politics, first as a congressional staffer and then state legislator before being elected to the House in 2006. He made an unsuccessful run for speaker once before, in 2015, and the election represents the pinnacle of his career.

But the speaker’s post has proved to be a formidable challenge for Republicans in recent years, with John Boehner resigning from the position in 2015 after a struggle with rebellious conservatives.

Boehner’s successor, Paul Ryan, a frequent target for conservatives, decided not to seek reelection in 2018 as then-President Trump shifted the party focus from Ryan’s fiscal priorities to immigration and culture-war issues.

McCarthy ran afoul of hardliners when he publicly acknowledged that Trump bore responsibility for the deadly Jan. 6, 2021, attack on the U.S. Capitol, days after the violence. He later repeatedly voiced allegiance to the former president.

On Saturday, Trump sought credit for the new speaker’s election, posting video on his Truth Social network of McCarthy thanking Trump for his support, captioning it: “Thank you Kevin. It was my great honor.”

The White House said Biden spoke with McCarthy on Saturday to congratulate him.

McCarthy visited at least 34 states to campaign for more than 165 candidates ahead of the midterms. The Congressional Leadership Fund, a group tied to him, contributed more than $160 million to help Republican House candidates. McCarthy sent candidates $6.5 million from his own campaign and four other entities under his control, according to his campaign team.

But to reach the speakership, he also agreed not to interfere in future Republican primaries, even if it meant boosting candidates that he thought were likelier to win a general election than right-wing rivals.

“Kevin is a good man. He’s a man of God,” Republican Representative Mike Garcia said in a speech nominating McCarthy on Friday. “He’s a patriot. He’s a leader who has led this conference to our current majority over the last four years. Those things are unassailable.”

U.S. Trustee files objection to FTX’s planned asset sales

Stock Markets 7 hours ago (Jan 07, 2023 05:20PM ET)

U.S. Trustee files objection to FTX's planned asset sales© Reuters. Former FTX Chief Executive Sam Bankman-Fried, who faces fraud charges over the collapse of the bankrupt cryptocurrency exchange, departs from his court hearing at Manhattan federal court in New York City, U.S. January 3, 2023. REUTERS/David Dee Delgado

(Reuters) – A U.S. Trustee filed an objection on Saturday to plans by bankrupt crypto exchange FTX to sell its digital currency futures and clearinghouse LedgerX, as well as units in Japan and Europe, according to a court filing.

FTX filed for bankruptcy protection in November and said last month it planned to sell its LedgerX, Embed, FTX Japan and FTX Europe businesses. On Tuesday, FTX founder Sam Bankman-Fried pleaded not guilty to criminal charges that he cheated investors and caused billions of dollars in losses, in what prosecutors have called an “epic” fraud.

The filing by U.S. Trustee Andrew Vara called for an independent investigation before the sale of the units, arguing that the companies may have information related to FTX’s bankruptcy.

“The sale of potentially valuable causes of action against the Debtors’ directors, officers and employees, or any other person or entity, should not be permitted until there has been a full and independent investigation into all persons and entities that may have been involved in any malfeasance, negligence or other actionable conduct,” the filing said.

FTX said in a court filing last month that the companies it planned to sell are relatively independent from the broader FTX group, and that each has its own segregated customer accounts and separate management teams.

Twitter further cuts staff overseeing global content moderation -Bloomberg News

Stock Markets 4 hours ago (Jan 07, 2023 04:05PM ET)

Twitter further cuts staff overseeing global content moderation -Bloomberg News© Reuters. FILE PHOTO: A view of the Twitter logo at its corporate headquarters in San Francisco, California, U.S. November 18, 2022. REUTERS/Carlos Barria/File Photo

(Reuters) -Twitter Inc made further staff cuts in the trust and safety team handling global content moderation and in the unit related to hate speech and harassment, Bloomberg news reported on Saturday.

At least a dozen more cuts on Friday night affected workers in the company’s Dublin and Singapore offices, the report said, citing people familiar with the matter.

Those laid off at the social media platform owned by Elon Musk include Nur Azhar Bin Ayob, a relatively recent hire as head of site integrity for the Asia-Pacific region, and Analuisa Dominguez, Twitter’s senior director of revenue policy, Bloomberg reported.

Workers on teams handling policy on misinformation, global appeals and state media on the platform were also eliminated, the report added.

Twitter’s vice president of trust and safety, Ella Irwin, confirmed to Reuters that Twitter made some cuts in the trust and safety team on Friday night but did not give details. “We have thousands of people within Trust and Safety who work content moderation and have not made cuts to the teams that do that work daily,” she said via email. Some of the cuts, she added, were in areas that lacked sufficient volume going forward or where it made sense to consolidate.

Twitter laid off roughly 3,700 employees in early November in a cost-cutting measure by Musk, and hundreds more subsequently resigned.

The company was also was hit with a lawsuit last month that claimed the social media company disproportionately targeted female employees in layoffs.

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