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Reuters
14-05-2025
- Business
- Reuters
UnitedHealth faces a long and painful recovery
NEW YORK, May 13 (Reuters Breakingviews) - Even UnitedHealth (UNH.N), opens new tab will struggle to overcome parasitic medical costs that Warren Buffett once called a tapeworm eating away at U.S. economic competitiveness. The $300 billion healthcare conglomerate reinstalled, opens new tab Chairman Stephen Hemsley as CEO and yanked its financial guidance. After abruptly losing about half its market value, however, any potential recovery will be long and painful. UnitedHealth stayed hardy for decades. From 2010 to 2020, its shares returned about 10 percentage points more per year than web search giant Alphabet. It capitalized on market power in insurance, growth in Medicare, the U.S. government program that covers medical costs for the elderly, and expansion into adjacent areas. Such outperformance screeched to a halt, months after a senior UnitedHealth executive was assassinated, allegedly by a man outraged by insurer practices. The company's first-quarter profit fell considerably short of what analysts were expecting, sending the stock price reeling in April. It tumbled another 15% on Tuesday after the news that boss Andrew Witty was departing for personal reasons. Hemsley, who served as CEO from 2006 to 2017, will be contending with new ailments. Although UnitedHealth is astoundingly profitable, evidenced by a 27% return on equity during the first three months of the year, both the company and the industry are in a much harsher spotlight. Intense public scrutiny makes it harder, opens new tab for insurers to restrain costs by, say, denying claims for care. Medical expenditures also have returned to trend, growing faster than the U.S. economy. They increased 7.5% in 2023, according to official data. Proposed assistance from the Trump administration to double the increase in reimbursement rates, to 5%, for Medicare Advantage, the privately administered version of the government program, will go only so far. It's also getting tougher to estimate costs for new Medicare Advantage patients. Part of the problem is that more than half of all Medicare participants have already enrolled. Insurers receive higher payments for sicker patients, but that incentivizes administrators to either select healthier customers or claim that they are ailing worse than they really are. The most profitable patients probably have been picked over. Moreover, government largesse for private health insurers looks increasingly ripe for targeting. If Medicare Advantage reimbursements were cut to better reflect their risk, it would save the government more than $1 trillion, opens new tab by 2035, the Congressional Budget Office estimated. Helmsley may be forced to opt for radical surgery, which is always dangerous. Follow @rob_cyran, opens new tab on X CONTEXT NEWS UnitedHealth said on May 13 that Chairman Stephen Hemsley would return as CEO, effective immediately, to replace Andrew Witty, who stepped down for personal reasons. Hemsley was previously in the role from 2006 to 2017. The insurance company also suspended its 2025 guidance, blaming accelerating medical spending by patients and costs. UnitedHealth shares were down 16%, to $318.93, at 1057 EDT.
Reuters
12-05-2025
- Business
- Reuters
Breakingviews - US-China truce cools down trade war, for now
HONG KONG, May 12 (Reuters Breakingviews) - Doomsday has been undone, for now. Forty days after President Donald Trump announced his reckless reciprocal tariffs in the White House Rose Garden, leading to a full-blown U.S.-China trade war with triple-digit levies, both sides have coordinated an about-face. The roll-back prompted a rally in stocks and the dollar, though the outcome is better for one side than the other. In a joint statement, opens new tab on Monday, the world's two largest economies agreed to scrap eye-watering levies. For the next 90 days, additional U.S. tariffs on Chinese goods imposed this year will stand at 30%, which encompasses the now-standard baseline 10% charge on most of Washington's trading partners plus a 20 percentage point hike Trump imposed in January over fentanyl concerns. China's tariffs on U.S. goods will be cut to 10%. But this is not a deal, it is a fragile truce governing $600 billion of bilateral trade and it could easily be shattered by new sector-specific tariffs vowed by the Trump administration. There is no clarity on where American export restrictions on semiconductor shipments to China, or a review of the U.S. electronics supply chain based on national security concerns, will end up, for instance. Nor is there a clear path to ensure U.S. tariffs don't rise back up to 54%, or Chinese tariffs up to 34%, after the 90-day deadline passes in August, so uncertainty on two-way trade will endure. Yet this truce is an obvious win for Beijing. Until now, Chinese leaders faced a 2.4 percentage point hit to annual GDP growth that, going by earlier estimates from Goldman Sachs, has now been pared to roughly 1 percentage point. Hitting their headline target for an expansion of around 5% still looks unlikely, but the shortfall will be less painful. The significant de-escalation in trade tensions implies a rapid and dangerous financial decoupling is off the table for now, too. It is also a propaganda win. Both the joint statement and Treasury Secretary Scott Bessent's comments were peppered with references to 'mutual respect', a phrase straight out of Communist Party officialese. Chinese leaders also have agreed vaguely only to 'suspend or remove' non-tariff measures, such as restrictions on rare-earth sales to the U.S., taken since April 2 – hardly a firm commitment. The pact demonstrates to other countries locked in tariff talks with Washington the tangible value of pushing back: Trump has shown that he will retreat when economic consequences start to bite and bond markets revolt. The rest of the world has every reason to hold the president's feet to the fire now that he has blinked again. Follow @KangHexin, opens new tab on X CONTEXT NEWS The U.S. and China on May 12 agreed to temporarily slash reciprocal tariffs. Additional tariffs imposed on Chinese goods during President Donald Trump's second administration have been lowered from over 145% to 30%. The revised level includes 10% in line with a baseline levy Washington imposed on other trading partners on April 2, as well as an additional 20% tariff imposed on China in January relating to fentanyl. Those in the opposite direction have been cut from 125% to 10%, with Beijing also promising to 'suspend or remove' non-tariff measures taken since April 2. The joint statement implies that additional American tariffs on Chinese exports could rise to 54% after 90 days, and Chinese tariffs on U.S. exports could rise to 34%.
Reuters
07-05-2025
- Business
- Reuters
Attacks cloud India's nascent safe haven status
HONG KONG/MUMBAI, May 7 (Reuters Breakingviews) - Skirmishes between India and Pakistan are not new. But the rich world's stake in South Asia is rapidly increasing. That makes the risk of a conflict between the nuclear-armed neighbours harder to ignore for countries, executives and investors betting on the world's fifth-largest economy emerging from the global trade war as some kind of safe haven. On Wednesday, hours after Prime Minister Narendra Modi unveiled a landmark trade deal with the UK and trumpeted his country's transformation into a vibrant hub of global commerce, India said it attacked nine "terrorist infrastructure" sites in Pakistan and Pakistani Kashmir. It's a jarring juxtaposition of economic and political events. A muscular response from New Delhi was expected after an attack by Islamist militants on Hindu tourists killed 26 people in Indian Kashmir last month. That explains why Indian stock, bond and currency traders barely flinched on Wednesday morning local time: the Nifty 50 index (.NSEI), opens new tab rebounded after starting in the red, 10-year government bond yields traded flat, and the rupee recovered some of its opening losses. The less developed markets in Karachi were more skittish. India also has a high tolerance for geopolitical risk. One concern, however, is that New Delhi may not achieve its desired deterrence. Unsurprisingly, Pakistan's army warns it will respond. Over the longer term, India's suspension of a long-standing water-sharing treaty that ensured supply to 80% of Pakistani farms threatens to turbocharge poverty and fuel further violence. Underscoring the lingering risks, several Indian states were due to conduct security drills on Wednesday to test civil preparedness, prompting multinational companies with global research and back office operations in the country to plan for the risk of power outages. It's a sobering moment for those counting on India to capture a bigger share of American supply chains from China – Apple (AAPL.O), opens new tab aims to make most of its U.S.-bound iPhones in India by the end of 2026. What's more, although the U.S. has not been a useful policeman of world order for some time, the danger of a conflict between India and Pakistan escalating may be higher under a chaotic administration in Washington. New Delhi has the most to lose from a protracted standoff. Despite some progress in seizing its moment on the global stage, the country remains a highly regulated, inefficient and complex market where overall foreign direct investment is falling as a share of GDP. Among emerging markets, India has suffered some of the most selling by foreign institutional investors so far this year. Heightened tensions with Pakistan provide another reason for the undecided to look away. Follow @ugalani, opens new tab and @ShritamaBose, opens new tab on X CONTEXT NEWS India attacked Pakistan and Pakistani Kashmir on May 7, and Pakistan said it had shot down five Indian fighter jets in the worst fighting in more than two decades between the nuclear-armed enemies. India said it struck nine Pakistani "terrorist infrastructure" sites, some of them linked to an attack by Islamist militants on Hindu tourists that killed 26 people in Indian Kashmir last month. Islamabad said six Pakistani locations were targeted and that none of them were militant camps. At least 26 civilians were killed and 46 injured, a Pakistan military spokesperson said. Indian forces attacked the headquarters of Islamist militant groups Jaish-e-Mohammed and Lashkar-e-Taiba, an Indian defence source told Reuters. "India has demonstrated considerable restraint in selection of targets and method of execution," the country's defence ministry said in a statement.
Reuters
06-05-2025
- Business
- Reuters
Donald Trump may help Ukraine despite himself
LVIV, Ukraine, May 6 (Reuters Breakingviews) - Donald Trump is not Ukraine's friend, despite his new minerals partnership, opens new tab with the country. At times the U.S. president has undermined Kyiv in its war with Russia — for example, by temporarily suspending critical intelligence in March — and he may yet do it irreparable harm. But Trump's turbulent first few months have some unintended benefits for Ukraine. Take his trade war with China. The president seems to have initially underestimated the challenges of launching a fight with Beijing at the same time as imposing tariffs on allies. The U.S. administration has since postponed many of the import taxes on other countries – perhaps partly because it realises it needs friends in its fight with the People's Republic. This gives Europe some leverage with Trump. Its leaders can tell the U.S. president that if he wants help taking on China, he must not undermine Ukraine. French President Emmanuel Macron and British Prime Minister Keir Starmer have already helped engineer a promising meeting between Trump and Ukrainian President Volodymyr Zelenskiy at Pope Francis' funeral. The U.S. President's trade war is also harming the global economy, which has driven down the oil price. The cost of a barrel of Brent crude has fallen from $82 to $61 since Trump took power. That is good news for Ukraine because Moscow relies on oil revenues to fund its war effort. TRUMP'S INTENTIONS While the unintended impact of Trump's actions could be positive for Ukraine, his intentions remain hard to fathom. Washington proposed a peace deal on April 17 that was fairly favourable to Moscow, including a plan to recognise Crimea as part of Russia. The U.S. also said it would pull out of the ceasefire talks that it is brokering if the two sides did not agree a deal fast. That raised the possibility that Washington might cut off all aid to Ukraine, including critical intelligence, and lift U.S. sanctions on Russia if Kyiv did not accept the peace terms it was proposing. More recently, however, Trump has swung a bit in Ukraine's direction. He has told Vladimir Putin to ' stop ' bombing Ukraine and said the Russian president might not be serious about the peace talks. What is more, Washington's new minerals partnership with Kyiv gives the Trump administration a stake in the country's future, though it does not give Ukraine a security guarantee. Trump might, of course, swing back to bullying Zelenskiy. But many pro-Ukrainian lawmakers in the U.S. president's own party have now found their voice. Republican Senator Lindsey Graham says 72 colleagues, opens new tab are ready to back legislation imposing secondary sanctions on countries that buy Russian oil. This could drive down the Kremlin's revenues to the point that Putin faces only hard choices – making it more likely he would accept a decent peace deal. Trump has floated such a policy – and U.S. officials have prepared new banking and energy sanctions against Russia, Reuters reported last week. Whether the president is actually willing to approve this package is unclear, but he would face opposition from his own supporters if he were now to take hostile action against Kyiv. He may not be willing to risk that now that his popularity has fallen because of his economic and other policies. If so, his actions would have a further unintended benefit for Ukraine. EUROPE'S TIME TO LEAD Europe has too often followed the U.S. lead on Ukraine. This passivity means Trump may still reach a deal with Putin that undermines European security. More recently, European countries led by the UK and France have been trying to put together a coalition that would help protect Ukraine if there is a peace deal. They also agreed with Kyiv a counterproposal to the U.S. plan to end the war. This was more favourable to Ukraine – including no recognition of Russia's occupation of Ukraine, no limits on the country's ability to arm itself, and no restrictions on allies giving it military support. This is not enough, though. European countries need to supercharge their support for Kyiv now – both to persuade the U.S. president not to sideline them in peace talks and to protect Ukraine if Trump cuts off all support. Probably the biggest thing Europe could do is provide Kyiv with a huge chunk of cash so it can outlast Russia in a war of attrition. The best way of doing this is to mobilise the sovereign assets that Russia had stashed in Europe before it invaded Ukraine. Of the $300 billion in reserves that the West froze at the start of the war, about three-quarters are in the EU and the UK. Some lawyers think confiscating these assets would be illegal. A more legally solid alternative is a ' reparation loan, opens new tab ', an idea I helped develop. This would involve European countries lending money to Ukraine backed by Kyiv's claim for war damages against Moscow. If the Kremlin refused to pay reparations, the lenders could net its debt to them against the frozen Russian assets they are sitting on. Washington would ideally participate in such a loan. But since it only has control of around $5 billion of Russia's assets, its involvement is not essential. A few months ago, the EU might have been afraid that acting without the U.S. would prompt China and other countries to switch from euro to dollar-denominated assets. But that risk has receded now that Trump has launched a trade war against the People's Republic and undermined faith in the greenback by flirting with the idea of firing the head of the independent Federal Reserve. That is yet another example of how his actions could have an unintended benefit for Ukraine.
Reuters
06-05-2025
- Business
- Reuters
Beijing's firm yuan nudge can cool Asia FX rally
HONG KONG, May 6 (Reuters Breakingviews) - Foreign exchange traders just had their wings clipped by the People's Bank of China. In the wake of a sharp rally for Asian currencies, they were expecting the country's central bank to make way for further falls against the dollar when it announced the yuan's trading band midpoint on Tuesday. The fact that it did not speaks volumes about Beijing's strategic approach to the ongoing trade war — most of it good. The central bank set the fix around which the yuan trades 2% in either direction at 7.2008 per dollar on return from Monday's national holiday. That's hardly changed from its level on Friday and triggered a partial reversal for the less-regulated offshore rate, which had risen 1% against the greenback over the long weekend. The steady hand from Beijing is welcome news for Chinese exporters already suffering from Washington's triple-digit tariffs on the country's goods. It is also in keeping with President Xi Jinping's mandate for a steady dollar exchange rate — not one so strong that it threatens to heap further disruption on a shaky economy already grappling with geopolitical upheaval. The move will also provide a much-needed anchor for the rest of the region - thanks to China's massive trading relationships with nearby peers - after other central banks noted their own currencies rallying hard against the U.S. dollar. Reuters reporting on an outsize 8% rise for the Taiwanese dollar over two days pins the blame on local exporters and insurers converting into the world's reserve currency, initially in response to easing Sino-American tensions. Malaysia's ringgit and South Korea's won are also up about 3% and 2% this month, respectively, while Japan's yen has risen 0.5%. On top of that, talk of de-dollarization has percolated in recent weeks as concerns grow over exposure to a more volatile U.S. Yet there is little sign of a structural shift to another currency, and Beijing's move to rein in yuan appreciation shows that China has little appetite to replace king dollar quite so quickly. Instead, Tuesday's trading band fix suggests Chinese leaders are keeping cooler heads after the initial hotting up with the U.S. got both sides hit with stratospheric levies. Talks between Beijing and Washington now look more likely, but even once commenced they are likely to drag on interminably. In the interim, Xi's preference for currency stability is likely to tamp down on foreign exchange volatility, both for his own country and the rest of Asia. Follow @KangHexin on X CONTEXT NEWS The People's Bank of China set the yuan's exchange rate at 7.2008 per dollar on May 6. The country's onshore-traded currency is allowed to move 2% in either direction. The midpoint is little changed from its previous level and triggered a partial reversal of gains for the less-regulated offshore exchange rate. Asian currencies have rallied hard against the dollar amid talk of potential de-dollarisation and hopes for trade war de-escalation. The Taiwanese dollar is up more than 6% against the U.S. currency this month, while the Korean won has climbed more than 2%. For more insights like these, click here, opens new tab to try Breakingviews for free.
