2024-02-22 10:59

CAPE TOWN, Feb 22 (Reuters) - South Africa will evaluate the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) held at the central bank annually and withdraw from it when funds are available, Finance Minister Enoch Godongwana told Reuters on Thursday. Godongwana said in his annual budget speech on Wednesday that the government was changing the framework governing the GFECRA account to allow it to draw down 150 billion rand ($8 billion) over the next three years to limit its borrowing. South Africa is struggling with an ailing economy and high debt ahead of a general election on May 29 that could see the governing African National Congress party lose its parliamentary majority for the first time since the end of apartheid 30 years ago. Godongwana told Reuters that using the funds to reduce the country's debt liability was more effective than allocating them to spending. "We are facing a major challenge of debt which is crowding out all other spending," said Godongwana. The GFECRA account captures gains and losses on the country's foreign currency reserve transactions and has a balance of more than 500 billion rand, larger than plausible reserve losses from rand appreciation, the National Treasury said. The treasury said the GFECRA drawdown would result in a saving of about 30 billion rand in debt-servicing costs over the next three years and help reduce the debt-to-GDP ratio, now projected to peak at 75.3% of GDP in 2025/26 from an estimate of 77.7% seen in November. Some analysts had proposed that the money be used to pay down the debts of struggling state-owned companies such as Transnet, the ports and logistics firm. But Godongwana said giving money to Transnet would "just be putting money in a hole." Instead, he said, the firm should implement its turnaround strategy and use its balance sheet to resolve the challenges it faces. Part of that strategy involves privatising parts of the business that Transnet can no longer maintain, a contentious issue for labour unions, particularly so in an election year. Analysts said the government having more frequent access to the GFECRA proceeds also raises concerns of the money being used to clear up fiscal mismanagement. Godongwana said the framework developed would protect against this but he added that if not closely guarded, there was a risk that future administrations could undo those safeguards. ($1 = 18.8901 rand) https://www.reuters.com/world/africa/safrica-draw-contingency-reserves-when-available-finmin-says-2024-02-22/

2024-02-22 09:51

Feb 22 (Reuters) - Nvidia shares climbed 12% before the bell on Thursday as booming demand for its AI chips helped the company forecast quarterly revenue much above Wall Street's lofty expectations, lifting AI and tech stocks globally. The top chip supplier was set to add more than $230 billion to its market value, taking it closer to $2 trillion for the first time and reclaiming its spot as Wall Street's third most valuable firm. Gains in Nvidia lifted aspiring AI competitor Advanced Micro Devices (AMD.O) , opens new tab 5.7%, while Super Micro Computer (SMCI.O) , opens new tab climbed 14.4% and Arm Holdings rose 9.5%. The iShares semiconductor ETF (SOXX.O) , opens new tab added 4.3%. Soaring demand for Nvidia's chips used by companies rushing to upgrade their AI offerings helped the Silicon Valley firm, forecast first-quarter revenue growth of 233%, ahead of Wall Street expectations of 208% rise. The midpoint of the forecast was $24 billion, which was above market expectations of $22.17 billion. "Nvidia continues to deliver in every way, and its results show there is still plenty of growth ahead. This isn't just a flash in the pan, nor a bubble, but a business that continues to make serious cash," said Josh Gilbert, Market Analyst at eToro. Expectations heading into the results were very high, with shares Nvidia surging nearly 36% this year to become the best performing S&P 500 (.SPX) , opens new tab stock and notching a record high just last week. The share surge that fueled S&P 500's (.SPX) , opens new tab climb to record highs this year had sparked fears that growth at Nvidia, the bellwether for AI demand, could disappoint and potentially disrupt the market rally. The overnight rally in chip stocks added 1.9% to Nasdaq 100 futures and lifted Wall Street futures, while Japan's Nikkei share average (.N225) , opens new tab surged to a record high, eclipsing the 1989 bubble-era peak. Nvidia was last trading at $767, on track to hit a record high at market open. https://www.reuters.com/technology/ai-leader-nvidia-rises-forecast-tops-wall-streets-lofty-goals-2024-02-22/

2024-02-22 09:09

Feb 22 (Reuters) - Bank of England policymaker Megan Greene said on Thursday she wanted more evidence that inflation pressures were easing before voting to cut rates, after dropping her call for higher rates at the start of this month. "Markets are pressuring every central bank to cut rates. I would need to wait to see more evidence that inflation wasn't as entrenched as we may fear before I would be willing to vote (for a cut)," she said at an event hosted in Johannesburg by risk advisors Kroll, where she was previously chief economist. Greene stuck fairly close to previous comments in her remarks, which echoed the line from Governor Andrew Bailey who said this month that it was too early to cut rates while services price inflation and wage growth remained high. Inflation was 4% in December and January and the BoE expects it to fall to its 2% target in the second quarter of this year, due to lower energy prices, before rising back towards 3% as the effect of the lower energy prices fades. Greene said she no longer thought rate rises were necessary because of downside surprises to the labour market and falling services price inflation. "That was encouraging news that was enough to make me feel like maybe we should just hold on and wait," she said. Last week official data showed Britain had slipped into a mild recession in the second half of 2023, although more forward-looking business surveys such as the purchasing managers' index have been more upbeat since the start of the year, which Greene welcomed on Thursday. "The PMI was more in contractionary territory. It seems to have ticked up and that provides some (news) on where the economy is going for this year," Greene said. On Wednesday, BoE policymaker Swati Dhingra urged fellow Monetary Policy Committee members to join her in voting for a rate cut to avoid damaging growth, arguing that weak producer price data offered a better guide to future inflation than services prices or wages. https://www.reuters.com/world/uk/bank-englands-greene-wants-more-evidence-rate-cut-2024-02-22/

2024-02-22 07:48

HOUSTON, Feb 22 (Reuters) - Oil futures settled higher on Thursday as hostilities continued in the Red Sea with Iran-aligned Houthis stepping up attacks near Yemen, but a large build in U.S. crude inventories weighed on gains. Brent crude futures settled higher, up 64 cents or 0.77% at $83.67 a barrel. U.S. West Texas Intermediate crude futures settled higher, up 70 cents or 0.9% at $78.61 a barrel. Israel's Army Radio reported on Thursday that Prime Minister Benjamin Netanyahu's war cabinet has approved sending negotiators to Gaza for truce talks taking place in Paris as pressure mounts in the Middle East. Meanwhile, Yemen's Iran-aligned Houthis will escalate their attacks on ships in the Red Sea and other waters and have introduced "submarine weapons," the group's leader said on Thursday, as it keeps up attacks on shipping to show support for Palestinians in the Gaza war. "The Red Sea situation continues to ferment and it is starting to register more with the market that this is an issue that is not going away," John Kilduff, a partner at New York-based Again Capital said. "Europe is bearing the brunt in terms of supply - but European supply problems become U.S. supply problems because that will put a call on US gasoline and diesel", he added. On Thursday, the premium for front-month WTI crude futures to the second month was up to 75 cents per barrel. That spread has widened in recent sessions, and on Tuesday touched $1.95 per barrel ahead of the March contract's expiry. Market players are likely pricing in a potential disruption to supply in the near future, with the front-month contract's premium over the second widening, which "indicates a tightening market," UBS analyst, Giovanni Staunovo said in a note. Still, crude gains were capped on Thursday by a build in U.S. oil inventories due to refinery maintenance and outages. U.S. crude inventories rose by 3.5 million barrels to 442.9 million barrels in the week ending Feb. 16, the U.S. Energy Information Administration said on Thursday, compared with analysts' expectations in a Reuters poll for a 3.9 million-barrel rise. U.S. crude inventories have climbed amid outages at large refineries that have left utilization rates at the lowest level in two years, though the plants are soon to resume output. Refinery utilization rates were unchanged last week, at 80.6%, according to EIA data on Thursday, compared with analysts' expectations of an uptick to 81.5%, according to a Reuters poll. BP's 435,000 barrel-per-day (bpd) Whiting refinery in Indiana, the largest in the U.S. Midwest, will return to full production in March, according to people familiar with plant operations, after a power outage from Feb. 1. TotalEnergies' 238,000-bpd refinery in Port Arthur, Texas, is also working to complete a restart, though it is still operating minimally following a weather-related power outage. The outages have drawn down distillate inventories, which include diesel and heating oil. Those stockpiles were down by 4 million barrels in the week to 121.7 million barrels, versus expectations for a 1.7 million-barrel drop, the EIA data showed. https://www.reuters.com/business/energy/oil-edges-higher-holding-gains-made-signs-tighter-supply-2024-02-22/

2024-02-22 07:43

SINGAPORE, Feb 22 (Reuters) - Promoting the Singapore Airshow on Sunday, the organiser of the event was asked what would be different about this year's aviation and defence jamboree. "Sustainability, sustainability, sustainability," he replied. The sound bite from Leck Chet Lam, managing director of the events business Experia, was a precursor to three days packed with green-focused panels and announcements, often accompanied by the tagline "sustainable aerospace together". Despite the public-facing united front, the air show has exposed deep divides over how the industry can achieve its goal of "net zero" carbon emissions by 2050. Airline bosses, green fuel producers and manufacturers contradicted each other and pointed fingers over the thorniest issue: who is responsible for the slow take up of so-called sustainable aviation fuel (SAF). SAF, a biofuel made from plant or animal materials, such as used cooking oil or agricultural waste, can reduce carbon emissions by up to 80% compared with traditional jet fuel. But it is up to five times more expensive and there is a huge shortage of feedstock needed to make it. SAF is similar in chemistry and performance to fossil jet fuel. Two decades after airlines began pledging to use biofuels, SAF makes up just 0.2% of the global jet fuel market. The aviation industry says that number will rise to 65% by 2050, although environmental groups say there is no credible roadmap to achieve the goal. Willie Walsh, the director general of the International Air Transport Association, said at an event on Monday that the only way to achieve "net zero" was the widespread use of SAF. "Demand is not an issue," Walsh said, adding that airlines use "every drop" of SAF that is produced. BLAME GAME The companies that produce SAF tell a different story. Hours before Walsh's comments, Ong Shwu Hoon, vice president of Asia-Pacific fuels at ExxonMobil (XOM.N) , opens new tab, said SAF demand was "very low", discouraging producers. Walsh, head of the biggest airline trade group, later hit back: "they would say that, because they don't want to produce any (SAF)". Exxon has said it is ramping up SAF production and is committed to supporting the aviation industry's net-zero goal. Environmental groups say the blame game over why SAF is struggling exemplifies an industry that sets arbitrary targets with no agreed upon plan to get there. "This chicken-and-egg debate is getting old and counterproductive," said Jo Dardenne, aviation director at Transport and Environment, a Brussels-based non-governmental organisation. "How can the industry put on a straight face when announcing net zero by 2050, when SAF uptake is less than 1% today and over 40,000 new planes will take to the skies in the next 20 years," Dardenne said. Dardenne called for regulators to take control and put strict mandates in place for SAF production and use. Some airline bosses speaking at the air show similarly sceptical of the industry's SAF plan. Riyadh Air Chief Operating Officer Peter Bellew said at a panel discussion on Tuesday that there wasn't enough feedstock to hit the industry's SAF targets. Bellew suggested that making air traffic control more efficient would be a quicker way to cut emissions. On the same panel, Yasuhiro Fukada, co-founder of the Japanese low-cost airline Zipair, said he was focusing on cutting plastic packaging on planes because that was more important than green fuel to the younger "Gen-Z" consumers his airline targets. Many environmentalists contend that the concept of a "sustainable" air show is evidence that the industry is tone deaf about tackling a looming climate emergency. Shows around the world were cancelled during the COVID pandemic, but they are now back in full force. As airline CEOs talked about paving a sustainable future inside a vast, air-conditioned aircraft hangar in Singapore, outside fighter jets and military helicopters performed mind-bending aerial tricks, spewing exhaust into the sky. On the ground, delegates who were flown in from around the world sat in snaking traffic queues trying to enter and exit the show. "Days of events like this must surely be numbered if we're serious about climate," said Robin Hicks, deputy editor of Eco-Business, a Singapore-based environmental group. https://www.reuters.com/sustainability/airlines-sustainability-mantra-masks-divides-over-green-future-2024-02-22/

2024-02-22 07:41

LONDON, Feb 22 (Reuters) - Anglo American (AAL.L) , opens new tab will review its assets after a 94% plunge in annual profit and writedowns at its diamonds and nickel operations, the company said on Thursday. The miner announced a $1.6 billion impairment charge on its De Beers diamond business owing to faltering demand and a $500 million impairment on its Barro Alto nickel mine as prices are hit by slowing demand from the electric vehicle sector. "We are now in a process of systematically going through all of our assets in a review just to assess their role in the portfolio, their success in the portfolio, and absolutely nothing is off the table," CEO Duncan Wanblad told reporters. The review is expected to take about a year, he said. Anglo's shares were up 3.5% by 1040 GMT. The London-listed miner's 2023 profit attributable to shareholders fell to $283 million from $4.5 billion a year earlier. The company declared a full-year dividend of $0.96 per share, down from $1.98. Net debt swelled to $10.6 billion from $6.9 billion, slightly below the $10.93 billion expected by analysts. Anglo, which also produces copper, platinum group metals (PGMs), iron ore and steelmaking coal, is not new to asset overhauls when commodity markets hit rock bottom. A decade ago, when its shares dived 75% on investor concerns over spiralling debt, the miner was poised to sell assets and cut jobs until the plans were abandoned thanks to a recovery in metal prices. Both its South African unit Kumba Iron Ore (KIOJ.J) , opens new tab and Anglo American Platinum (AMSJ.J) , opens new tab this week announced plans to cut more than 4,000 jobs and review agreements with 780 contractors. "In terms of cycle timing, the two assets that are dragging the portfolio today are the PGMs and diamonds businesses," Wanblad said, adding that more action will be taken if platinum prices continue to decline. Sales of rough diamonds at the company's De Beers unit fell in 2023 as an economic slowdown curbed appetite for luxury items in major consumers China and the United States. "To make any short-term decisions, you have to be absolutely certain that there had been a structural change in either of those markets or those businesses for us to want to do something very drastic with them," Wanblad added. Anglo had already announced $1.8 billion of spending cuts by 2026 after logging a $1.7 billion writedown on its project to produce fertiliser nutrients in Britain. The company is in talks with potential partners over options including the sale of a stake in the project. "The company-specific turnaround story, which could include changes to the portfolio or bringing in a partner for Woodsmith, is compelling," Jefferies analysts wrote in a note. https://www.reuters.com/markets/commodities/anglo-american-full-year-profit-plunges-by-94-2024-02-22/