2023-11-15 06:46

MSCI AC World index up 0.6% US retail sales fell in Oct, but less than forecast UK inflation falls to 4.6% in October China's factory output, consumption beat forecasts Fed funds futures price in rate cuts by May NEW YORK/MILAN, Nov 15 (Reuters) - World shares extended gains on Wednesday and the dollar stemmed losses as expectations of an end to a global rate hike cycle spurred on investors following benign inflation readings in the U.S. and across Europe. By the end of the session, the MSCI world equity index (.MIWD00000PUS), which tracks shares in 49 countries, jumped 0.6% to its highest since mid-September, following a positive session in Europe and a rally across Asia, aided by a report of stimulus in China. Stocks also rose across the board on Wall Street. The S&P 500 Index (.SPX) rose 0.2%, the Dow Jones Industrial Average (.DJI) added 0.5%, and the Nasdaq Composite Index (.IXIC) narrowed earlier gains to end flat. U.S. retail sales fell in October, though by less than expected, giving some investors cause to celebrate that the U.S. economy is poised for a so-called "soft landing" and that the Federal Reserve is likely done raising rates. Recent U.S. data "supports our view that consumer price inflation will continue to fall more rapidly than many expect, even as activity in the real economy holds up under the weight of higher rates," economists at Capital Economics said in a note. The pan-European STOXX 600 (.STOXX) index gained 0.4% after data showed British inflation cooled more than forecast in October, hitting sterling and reinforcing bets the Bank of England will be cutting rates by the middle of 2024. "Good weather seems to be back. The market is starting to price in the possibility of rate cuts in the United States and also in Europe," said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan. "I think the equity rally will continue into 2024 and so will bonds of course, subject to the international picture that remains complicated with the war in Ukraine, the Middle East and trade tensions with China," he added. The British consumer price index rose by 4.6% in the 12 months to October, slowing from September's 6.7% increase, the Office for National Statistics said. Inflation in Italy and France also receded to an annual growth rate of 1.8% and 4.5% respectively last month, according to their statistics agencies. On Tuesday, data showed U.S. headline consumer prices were flat in October, against expectations for a 0.1% rise. Core CPI, at 0.2%, also came in below a forecast of 0.3%. "I think the CPI number has just pushed the last person to cover their shorts," Naka Matsuzawa, Nomura's chief macro strategist, said on the phone from Tokyo. He sees a "more complicated" process ahead, where stock market exuberance eventually collides with bond market expectations that an economic slowdown will drive rate cuts. DOLLAR SPUTTERS The dollar sputtered after slumping on Tuesday following the softer U.S. inflation print. The dollar index , which measures the currency against a basket of peers, stood at 104.33, not far from Tuesday's two-month low of 103.98. Interest rate futures swung to price in an interest rate cut by the Fed as early as May, with a 30% chance it could come even sooner, in March. After dropping 19 basis points (bps) on Tuesday in their biggest one-day drop since March, 10-year Treasury yields bounced to 4.5333%. Ten-year German bond yields stood at 2.639%. Sterling slid 0.72% to $1.24105 as the cooler inflation print helped the British currency reverse part of Tuesday's surge against a falling dollar. That helped London stocks (.FTSE) outperform, up 0.62%. The euro inched around 0.25% lower at $1.08515. CHINA SUPPORT Adding to markets' cheer was strong industrial output and retail sales data in China and a report from Bloomberg News that China plans to provide 1 trillion yuan ($137 billion) of low-cost financing to boost the housing market. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 2.85%, hitting its highest since mid-September. The Hang Seng (.HSI) rose nearly 4% in Hong Kong as mainland property developers (.HSMPI) rallied over 5%. China's retail sales rose 7.6% in October, although that may have been flattered by the Golden Week holiday at the start of the month. Real estate remains in a deep funk, with investment in January-October down 9.3% year-on-year. "It is clear that Beijing has been turning more proactive in recent weeks to help support the recovery," HSBC economists said in a note to clients. "With ongoing uncertainties highlighted by the property sector, we think Beijing will continue to step up support through both fiscal and monetary means." The weaker dollar and the expectation of more stimulus in top metals consumer China kept London copper prices , hovering near a five-week peak scaled in the previous session. Iron ore rallied to a 2-1/2 year high in Shanghai and was last up 0.8%. Brent crude futures reversed course to trade down 1.8% to $80.98 a barrel. https://www.reuters.com/markets/global-markets-wrapup-1-2023-11-15/

2023-11-15 06:43

Nov 15 (Reuters) - The European Union reached a deal on Wednesday on a law to place methane emissions limits on Europe's oil and gas imports from 2030, pressuring international suppliers to clamp down on leaks of the potent greenhouse gas. Methane is the second-biggest cause of climate change after carbon dioxide, and in the short term has a far higher warming effect. Rapid cuts in methane emissions this decade are crucial if the world is to avoid severe climate change. After all-night talks, negotiators from EU member states and the European Parliament agreed to impose "maximum methane intensity values" by 2030 on producers abroad sending fossil fuels into Europe, the council of the EU, which represents member states, said in a statement. The import rules are likely to hit major gas suppliers which include the U.S., Algeria and Russia. Moscow slashed deliveries to Europe last year and has since been replaced as Europe's biggest pipeline gas supplier by Norway, whose supply has among the world's lowest methane intensity. "Finally, the EU tackles the second most important greenhouse gas with ambitious measures," said Jutta Paulus, the EU Parliament's co-lead negotiator, adding that the law "will have repercussions worldwide". Paulus told reporters importers will face financial penalties if they buy from foreign suppliers that don't comply with the limit - effectively imposing a fee on non-compliant fuels. The methane standard would be mandatory for supply contracts signed after the law enters into force, likely later this year, after the European Parliament and EU countries give it final approval. That step is usually a formality that waves through pre-agreed deals. The EU's exact methane emissions limit will be set out by the European Commission before it applies. Methane leaches into the atmosphere from leaky pipelines and infrastructure at oil and gas fields. The regulation also introduces new requirements for the oil, gas and coal sectors to measure, report and verify methane emissions. The deal obliges oil and gas producers in Europe to regularly check for and fix leaks of the potent greenhouse gas in their operations. It also bans most cases of flaring and venting, when companies intentionally burn off or release unwanted methane into the atmosphere, from 2025 or 2027 depending on the type of infrastructure. https://www.reuters.com/business/environment/eu-agrees-law-track-reduce-methane-emissions-oil-gas-sector-2023-11-15/

2023-11-15 06:41

HOUSTON, Nov 15 (Reuters) - U.S. oil pipeline and export terminal operators are stepping up quality checks after finding an out-of-specification cargo that raised worries of excess metals contaminating Texas shale oil, operators and sources said. WTI Midland, the crude from the top U.S. shale field which joined the Dated Brent index in June, increasingly is flowing to European refiners. Concerns that contaminated oil could damage refining units and the oil's reputation spurred more routine testing, people familiar with the matter said. Oil index publisher S&P Global Platts added WTI Midland to the Dated Brent Index and set a quality standard for the crude. Its testing has found only one out-of-specification cargo among this year's 54 trades, a spokesperson said. WTI Midland crude flows to Europe have set the price of widely used Dated Brent on more than half the trading days since May, according to price reporting agency Argus, putting more of the U.S. crude in the hands of European refiners. But high levels of iron and vanadium metal in oils blended into WTI Midland can damage European refineries, which typically have less complex processing units and are unable to filter the metals. U.S. pipeline companies and crude marketers often mix more expensive WTI Midland with cheaper varieties such as West Texas Sour, Domestic Sweet or Eagle Ford to boost profit margins. Those cheaper grades often contain higher levels of iron, vanadium and nickel. MONITORING SYSTEM Oil pipeline and terminal operator Enterprise Product Partners (EPD.N) said it has developed a system to monitor its crude input to ensure the oil sold as WTI Midland meets specifications that mirror Platts. "Every WTI cargo we've loaded has met the Platts Dated Brent specs. That is over 100 cargoes of crude," Co-Chief Executive Officer James Teague said in October. Energy Transfer (ET.N) earlier this year discovered an out-of-spec batch of WTI Midland, Executive Vice President Adam Arthur told an industry event in Houston in June. The company declined to comment further. ONEOK Inc (OKE.N), which bought Magellan Midstream last month, is trying to ensure the WTI Midland crude it exports is separated from other pipeline streams, one of the people familiar with the matter said. ONEOK declined to comment. Pipeline firm Enbridge (ENB.TO), which operates an oil export terminal near Corpus Christi, Texas, has stepped up quality checks, but has not identified any issues to date, the company said. WTI BLENDS Despite the checks, "there are definitely lower quality barrels that are getting marginally blended into export WTI in Midland and elsewhere," a third person said. Platts requires oil provided to the Dated Brent Index be unblended crude transported from the Permian on specific pipelines and exported from one of 11 terminals. It also limits how much minerals and metals can be present. It has not removed any export terminals from the approved list for not meeting its specification, a spokesperson said. Other companies with approved oil export terminals, including Pin Oak, Flint Hills, Gibson Energy (GEI.TO), did not respond to requests for comment. Plains All American (PAA.O) and EPIC declined to comment. Traces of Vanadium and iron present in WTI crude at an Enterprise's Houston storage terminal fell in September and October from June, data posted on the company's website showed. It did not publish the data in July and August while it was scrutinizing and tightening quality controls, one of the people said. "Some pipelines originating in the Permian (oilfield) are getting a reputation for having higher metals content," said oil consultant Brett Hunter, of Energy Hunter LLC. "We expect more robust quality programs, and more frequent testing." https://www.reuters.com/business/energy/texas-crude-quality-checks-rise-after-excess-metal-found-oil-export-2023-11-15/

2023-11-15 06:38

BUENOS AIRES, Nov 15 (Reuters) - Argentina has a $12 billion energy conundrum: what to do about state subsidies that keep prices at a minimum for two-thirds of consumers, a popular measure that is straining state coffers and a deal with the International Monetary Fund (IMF). Those subsidies, that keep energy bills at under 15% of normal, will play a key role in a run-off presidential election on Sunday between Economy Minister Sergio Massa and libertarian outsider Javier Milei, who wants to "chainsaw" state spending. Milei has said he will cut all subsidies, but admitted it would have to be done slowly. Massa, meanwhile, claims he would keep energy bills down, though needs to trim state spending to meet a target he has set to erase a deep fiscal deficit. It is a tricky balancing act. On one hand inflation is headed towards 185% by the end of the year, the latest central bank poll estimated, which has left voters angry at constantly rising prices and dragged two-fifths of the population into poverty. Subsidies help ease the pain. Argentina, however, has a deep fiscal deficit, negative net dollar reserves and is playing a risky game of whack-a-mole with its debts to the IMF, bondholders, and more recently China. It badly needs to cut spending to get its finances in order. "It is a challenge for whoever wins to reverse this situation," said Emilio Apud, ex-energy secretary and a former director of state oil firm YPF (YPFD.BA) , who added that the issue was a remnant of decades of costly state intervention. He admitted hiking energy bills was tough medicine in a society already hurting, but argued it needed to be done. "If you increase energy prices today, there is an inflationary peak and it's over. If you don't, inflation continues its upward curve without limit," he said. Economists and energy analysts generally agree that the country, which has the world's second largest shale gas reserves and fourth for shale oil in the huge Vaca Muerta formation, needs to cut back subsidies that were near 2% of GDP last year. Data from consulting firm Aleph Energy show they were $12.4 billion in 2022 and already over $8 billion up till September this year. Daniel Dreizzen, director of Aleph and a former secretary of energy planning, said ironically the subsidies fanned inflation as they were often funded by the central bank printing money. "All these subsidies - last year 1.9% of GDP - are financed with monetary emission. That ends up being paid in some way by the entire population via inflation," said Dreizzen. 'SUBSIDIES WON'T DISAPPEAR' Energy prices have become central in the election campaign. Peronist Massa has alleged that under Milei monthly electricity bills would skyrocket from around 5,000 pesos ($14 at the official exchange rate) to 15,000 pesos. He has said train and bus fares would rise even more sharply. The left-leaning Peronists have a history of subsidizing energy costs, controversial amid years of economic crisis, debt defaults and failed programs with the IMF. Conservative leader Mauricio Macri (2015-19) cut energy subsidies back. Currently higher-income residents pay about 80% of cost, making up around one-third of the total. The rest of the population pay 15% or 10% for the most vulnerable sectors. Milei did not respond to a request for comment, but a source from his team denied subsidies would simply vanish. "Subsidies won't disappear, nor will rates be at levels that people cannot pay," a source from Milei's team told Reuters, asking not to be named. "What the state has to ensure is that the subsidy money is received by whoever really needs it." The third largest economy in Latin America is making a big bet on its shale region Vaca Muerta, hoping that by boosting production it can cut reliance on costly imports and even start exporting more to bring in dollars. A government-set lower local oil price does however dampen investment, energy firms said. Both Massa and Milei have highlighted the potential of Vaca Muerta, with Massa pushing plans to boost production, add pipelines, and eventually liquefied natural gas (LNG) exports. Milei has spoken about privatizing parts of state firm YPF. "No one doubts that Argentina can be a great energy exporter," said Aleph's Dreizzen, adding it could reach an energy trade surplus of $3.3 billion next year. "But the tariff angle is a sensitive issue in a country that has over 40% poverty." Raquel Ramírez, a 59-year-old manager of a confectionery shop in Buenos Aires, said she doubted Milei would get rid of the subsidies. She focused her on anger on inflation. "I don't think Milei will eliminate all subsidies," she said, adding she would likely vote for him for a "change". "I just can't vote for Massa. He has been minister for more than a year and prices are increasing every day. I can't buy even a kilo of tomatoes and it's hard to pay my insurance." https://www.reuters.com/business/energy/argentinas-presidential-candidates-face-12-bln-energy-subsidy-conundrum-2023-11-15/

2023-11-15 06:16

NEW YORK, Nov 15 (Reuters) - The dollar gained on Wednesday after still strong U.S. retail sales fell less than expected in October, a reminder for the market that a definitive date for the Federal Reserve to cut interest rates is still unknown. The dollar bounced off its biggest drop in a year on Tuesday when the consumer price index (CPI) showed U.S. inflation was cooling faster than expected, sealing market expectations that the Fed was done hiking interest rates. But at an annualized 3.2%, the pace of inflation remains well above the Fed's 2% target, leaving the question of when the Fed will cut rates unresolved. "Until the market believes that the next Fed move is going to be a cut and believes that concretely, we'll see episodic patches of dollar strength before dollar weakness becomes the trade," said Steven Englander, head of global G10 FX research at Standard Chartered Bank in New York. "Today's data were neutral to slightly stronger than expected. The market is still not sure on U.S. growth." U.S. retail sales fell for the first time in seven months in October, the Commerce Department's Census Bureau said, while producer prices posted the biggest decline in three-and-a-half years last month, according to the Labor Department's Bureau of Labor Statistics. More than 80% of the decline last month in the Producer Price Index for final demand goods was attributed to a 15.3% drop in gasoline prices, BLS said. "The markets are anticipating rate cuts coming in the first couple of quarters next year," said Roosevelt Bowman, senior investment strategist at Bernstein Private Wealth Management in New York. "But in our view, we just don't think that downward momentum in inflation is going to be nearly as fast as what the market is estimating," he said. The dollar index, a measure of the U.S. currency versus six others, rose 0.30%, off its two-month low of 103.98 on Tuesday. The euro was down 0.32% at $1.0844, after touching its highest since August the day before. Investors have all but eliminated the likelihood of another rate hike when Fed policymakers meet in December, while bets of a rate cut in May 2024 increased to more than 65%, according to the CME Group's FedWatch Tool. The fourth quarter in the past two years has not been good for the dollar, which peaked in the third quarter of both 2021 and 2022 and sold off through to January each year, said Brad Bechtel, global head of FX at Jefferies in New York. "I'm not necessarily saying that history is going exactly to repeat itself, but I don't necessarily want to be buying or getting long the dollar just yet," he said. "We need to see more of this play out." Earlier in Britain, data showed inflation last month eased to 4.6%, its slowest pace in two years. The reading, below forecasts of 4.8%, prompted a reassessment of the outlook for Bank of England policy and dented sterling. Sterling was last trading at $1.2408, down 0.71%. On Tuesday, the pound rose by 1.8% against the dollar, marking its biggest one-day gain in a year. The Japanese yen weakened 0.66% at 151.37 per dollar. Earlier in Japan, data showed the economy contracted in July-September, complicating the Japanese central bank's efforts to ease out of its ultra-easy monetary policy. On Monday, the yen touched a one-year low close to 152. The dollar was knocked back from the 152 level on Monday, after a routine options expiry unleashed some profit-taking that took the yen to around 151.20. The offshore Chinese yuan, meanwhile, received some support The offshore yuan , meanwhile, briefly ticked up to a three-month high of $7.2385 against the dollar after domestic industrial output and retail sales growth beat expectations. Evidence of ongoing weakness in China's property sector, where data showed sales fell faster in October and investment in real estate slumped, took some of the shine off the rally. The offshore Chinese yuan rose 0.10% versus the greenback at $7.2585 per dollar. https://www.reuters.com/markets/currencies/dollar-down-markets-bet-fed-done-with-hikes-2023-11-15/

2023-11-15 06:15

JAKARTA, Nov 15 (Reuters) - Indonesia's state utility Perusahaan Listrik Negara (PLN) plans to build an additional 31.6 gigawatts of renewable power capacity between 2024 and 2033, chief executive Darmawan Prasodjo told parliament on Wednesday. The extra renewable capacity would represent 75% of the additional generation for the period, while the remaining capacity is expected to come from gas power plants, Darmawan said, citing a draft power supply masterplan. In the 2021-2030 power supply masterplan, PLN had planned to build 20.9 GW renewable capacity and nearly 20 GW of gas and coal power capacity. The new plan is aimed at accelerating adoption of cleaner energy as Indonesia aims to reach net-zero emissions before 2060. The company will also build transmissions to connect hydropower and other renewable energy sources to areas with high power demand, mostly in Java. https://www.reuters.com/sustainability/climate-energy/indonesia-state-utility-plans-316-gw-renewable-power-capacity-2024-2033-2023-11-15/