2023-11-08 19:21

LONDON/CAIRO, Nov 8 (Reuters) - The prospect of the EU receiving more liquefied natural gas (LNG) from Egypt in the short and medium term looks unachievable due to tight gas balances and reduced imports form Israel, Oxford Institute of Energy Studies (OIES) said. Egypt shipped 80% of its liquefied natural gas (LNG) exports to Europe last year as the continent sought to replace Russian pipeline gas after Moscow's invasion of Ukraine. The European Union has in June last year signed a framework deal between the bloc, Israel and Egypt that would allow Cairo to maintain "relatively high volumes" of LNG deliveries to Europe. Due to the Israel-Hamas conflict, Chevron (CVX.N) in October shut the Israeli Tamar gas field amid the military conflict in the country and suspended exports through the subsea EMG pipeline, which runs from Ashkelon in southern Israel to Egypt. Gas balances at the most populous Arab country, which faces growing demand for gas from its population of 105 million, were already under pressure before the conflict erupted on Oct. 7 as gas production had declined to a three-year low this year. The country has grappled with power cuts that started in the summer and extended to October as heatwaves have driven up demand for cooling. High summer demand resulted in very low or zero LNG exports in May-September. Despite resuming LNG exports in October and November, the report and other analysts believe that the conflict will keep Egypt's LNG exports under pressure. "With tight gas balances and reduced imports from Israel, the prospect of the EU receiving more LNG from Egypt in the short and medium term looks unachievable," OIES said in a report. "The June 2022 Memorandum of Understanding between Egypt, Israel, and the EU, committing to higher supply, is now probably undeliverable," it added. Israel's gas exports to Egypt are part of Egypt's supply mix and therefore support Egyptian LNG exports. Cairo imports about 7 billion cubic feet per year of natural gas from the Tamar and Leviathan developments, helping meet domestic demand and power liquefaction plants, according to Rystad Energy. Rystad Energy estimated that Egypt exported 3.7 million tonnes of LNG between October 2022 and January 2023, with the highest amount being just less than 1 million tonnes in December 2022. According to data from consultancies ICIS and Kpler, Egypt has exported two cargoes in October and November, but volumes were nearly one-third of what it exported in April. Alex Froley, LNG analyst at ICIS, said that during October-December 2022 Egypt loaded 42 cargoes compared to only two in that period so far this year. "Egypt's LNG exports look set to remain low to zero over winter," Froley said. Egypt's petroleum ministry did not immediately respond to a request for comment. https://www.reuters.com/business/energy/mideast-conflict-dims-prospect-more-egyptian-lng-exports-europe-2023-11-08/

2023-11-08 18:40

By Steve Scherer and David Ljunggren OTTAWA, Nov 8 (Reuters) - Some members of the Bank of Canada's (BoCs) policy-setting governing council saw the likely need for further interest rate hikes when they left borrowing costs on hold on Oct. 25, minutes published on Wednesday showed. The six council members reached a "strong consensus" to leave rates at a 22-year high of 5.00% to collect more evidence that growth and inflation were slowing, according to the minutes, known as the summary of deliberations. The BoC sets rates by consensus. The bank began providing minutes of the discussions this year and this is the first time they have shown a possible policy split within the council. "Some members felt that it was more likely than not that the policy rate would need to increase further to return inflation to target," the minutes read. "Others viewed the most likely scenario as one where a 5% policy rate would be sufficient to get inflation back to the 2% target, provided it was maintained at that level for long enough." The minutes went on to say that the council decided to be "patient" and leave rates on hold. "They agreed to revisit the need for a higher policy rate at future decisions with the benefit of more information," the minutes said. In October, the BoC said the path to avoid a recession had narrowed, and it left the door open to more hikes. The bank is trying to walk a fine line. It wants to cool the economy just enough to bring down inflation, but it does not want to jack up rates too high and trigger a deep recession, Governor Tiff Macklem has said. The bank increased rates 10 times between March 2022 and this July, with inflation peaking at more than 8% last year. Inflation in September was 3.8%, but the BoC says it will not come down to target until end-2025. While the council seemed to lean to the hawkish side, Macklem said in a CBC interview on Oct 25 that rates may be at their peak. The minutes reveal there was concern the economy could slow more than expected. "If global financial conditions tighten further or past increases in the policy interest rate restrain demand more than expected, the economy could be weaker and inflation lower than projected," the document read. The council also discussed the rising spending by the provincial and federal governments, which "could get in the way of returning inflation to target". ((Reuters Ottawa bureau; [email protected])) Keywords: CANADA CENBANK/ https://www.reuters.com/markets/rates-bonds/some-bank-canada-governors-saw-likely-need-higher-rates-minutes-2023-11-08/

2023-11-08 17:43

Nov 8 (Reuters) - Chinese authorities have asked Ping An Insurance Group to take a controlling stake in embattled Country Garden (2007.HK), the nation's biggest private property developer, four people familiar with the plan said. China's State Council, which is headed by Premier Li Qiang, has instructed the local government of Guangdong province, where both companies are based, to help arrange a rescue of Country Garden by Ping An, said two of the sources who have direct knowledge of the matter. A spokesperson for Ping An (601318.SS) said the company had not been approached by the government and denied the information reported by Reuters. Ping An has "not been asked by (the) Government to takeover Country Garden. We categorically deny this story. It is untrue," the company said in a statement to Reuters. It reiterated its denial in a public statement after Reuters first published this report. A Reuters spokesperson said: “We stand by our reporting.” The insurer, which vies with China Life (601628.SS) for the title of the country's biggest insurance group by market value, declined to make its founder and chairman, Ma Mingzhe, available for an interview. Ma, who also uses the English first name Peter, did not respond to an emailed Reuters request for comment. China's State Council Information Office and the Guangdong local government did not respond to requests for comment. Country Garden declined to comment. Ping An's Hong Kong-listed shares finished 5.4% lower in heavy trade, wiping about $2.1 billion off its market value. Country Garden shares surged 12.2%, valuing the company at about $3 billion, and stocks of other Chinese developers also jumped. A state-engineered rescue of Country Garden by Ping An would be one of the most significant interventions to date by authorities to support the cash-squeezed and highly indebted property sector, which accounts for one-quarter of China's economic activity and has sparked fears of a broader financial crisis. "If this is true, it will have a very significant positive impact on the property and capital markets," said Xu Tianchen, senior economist at the Economist Intelligence Unit. "Only equity injections, such as corporate takeovers or nationalisations, are likely to turn around the confidence of home buyers and investors and materially change the situation." MITIGATING RISK Authorities are keen that any risks posed by Country Garden's liquidity problems should not spill over to the wider economy, said three of the sources. While in China companies can rarely ignore a request from the central government, the three sources said Ping An has been asked to come up with details of the plan and will have leeway to negotiate terms of any deal. Talks between authorities and core Ping An leaders began in late August and are still at an early stage, said two of them. Ping An has been asked to conduct due diligence on Country Garden, two sources also said, adding that authorities understood the insurer was a listed company answerable to shareholders. A fifth person with knowledge of the matter said some talks between Ping An and the Guangdong local government about a rescue of Country Garden took place in September. All sources declined to be identified due to the sensitivity of the matter. Discussions between Ping An and authorities are being led by officials in the financial markets department of the People's Bank of China (PBOC), which is the central bank, and include Country Garden, said two sources. The National Financial Regulatory Administration (NFRA) is also involved in the talks, they added. Neither the PBOC nor the NFRA responded to Reuters requests for comment. Authorities want Ping An to take a stake of more than 50%, according to one person with direct knowledge and one person briefed on the plan. Country Garden's largest shareholder with a stake of about 52% is Yang Huiyan, chairperson and daughter of a co-founder. Reuters was not able to reach Yang for comment. If Ping An were to become Country Garden's controlling shareholder, authorities would like it to inject capital in stages to ease the developer's liquidity problems, according to four sources. The property developer last month missed a deadline to pay a $15 million coupon and the market has deemed it to be in default on its offshore bonds which total some $11 billion. Country Garden has said it expects to be unable to meet all of its offshore debt obligations and hopes to seek a "holistic" solution to its difficulties. Chinese authorities are eager to make the proposed takeover a possible template for other financially troubled developers, two of the sources also said. GUANGDONG SOLUTION Authorities are keen for the Country Garden's liquidity problems to be resolved within Guangdong, three sources said. Ping An was a natural choice because it is based in Guangdong and has been a major Country Garden shareholder, according to two of the sources. Ping An said after Reuters first published this report that it no longer holds Country Garden shares. It held a 4.99% stake as of Aug. 11, according to Hong Kong stock exchange data. A state-engineered takeover of one company by another is not without precedent in China. But there has not been one in the property sector since Beijing flagged measures in 2020 to tackle the industry's very high debt levels, triggering a liquidity crunch. Although many other Chinese property developers, including giant China Evergrande (3333.HK), have defaulted on their debt, policy steps have mostly concentrated on lowering mortgage rates and relaxing rules so that it is easier for people to buy homes. But in a sign that governmental authorities are willing to play a bigger role, China Vanke's (000002.SZ) top shareholder, state-owned Shenzhen Metro on Monday said it had prepared 10 billion yuan ($1.4 billion) worth of "market tools" to support the country's No. 2 developer. Country Garden had total liabilities of 1.4 trillion yuan ($190 billion) at the end of June. It has more than 3,000 projects under development nationwide. Ping An has been tapped by authorities as a rescuer for an ailing company before. It participated in state-guided aid for Peking University Founder Group in 2021 and 2022. Its main unit, Ping An Life, was part of a consortium that was involved in restructuring the group's debt and then the unit took 67% ownership of the reorganised company. ($1 = 7.2846 Chinese yuan) https://www.reuters.com/world/china/china-authorities-ask-ping-an-take-controlling-stake-country-garden-sources-say-2023-11-08/

2023-11-08 17:08

NEW YORK, Nov 8 (Reuters) - The Cleveland Federal Reserve said on Wednesday it has begun to search for a replacement for its current president, Loretta Mester, a veteran central banker who has led the regional bank since 2014. Mester is scheduled to retire on June 30, 2024 due to Fed rules that limit officials' service based on age and length of service. Over her tenure, she has been one of the U.S. central bank's more hawkish voices and has at times favored a tighter monetary policy stance than her colleagues. The search process will be overseen by members of the Cleveland Fed's Board of Directors who do not come from firms the central bank regulates. The process will be led by Heidi Gartland, the chief government and community relations officer with University Hospitals and the deputy chair of the Cleveland Fed's board. The U.S. central bank must approve the Cleveland Fed's choice. The 12 regional Fed banks are quasi-private institutions that are technically owned by local banks, although they operate under the control of the Fed's Board of Governors in Washington. Their respective boards are drawn from the private sector. In a press release announcing the start of the search, Gartland said, "Mester's strong leadership over the past decade has positioned the Cleveland Fed as an important resource to the community and the nation." Gartland added that "thanks in no small part to her intellect, energy, and dedication to public service, the Cleveland Fed today is known around the globe for its top-quality economic research, financial institution supervision, community development outreach, and delivery of financial services." LEADERSHIP FLUX Searches for regional Fed banks have become contentious in recent years due to the opacity of the process. Whereas Fed officials in Washington are selected by the U.S. president and confirmed by the Senate in a public process, regional Fed leaders are chosen behind closed doors and the public rarely knows who is in contention for a position that helps set the nation's monetary policy and regulates local financial institutions. In the last few years, regional Fed leadership has been in flux. Two officials left early in September 2021 amid questions about their investment activities, while the Kansas City Fed dealt with an extended search for new leadership even as its own former leader, Esther George, had faced mandatory retirement. Also, the St. Louis Fed is still searching for a new boss after its former chief, James Bullard, abruptly quit over the summer to take a position leading Purdue University's business school. Fed banks have also been under increased pressure in recent years to diversify their leadership away from the white males drawn from business or finance who have typically dominated those positions. And to that end, a number of regional Fed banks have flagged diversity as a key consideration in their respective search processes. Mester will exit the Fed after spending most of her professional life within the central bank. Before coming to the Cleveland Fed, Mester led the research department of the Philadelphia Fed. Mester, according to data from Wrightson ICAP, dissented in 8% of her Federal Open Market Committee votes in favor of a tighter policy stance than preferred by other policymakers. Mester notably voted against parts of the Fed's initial response to the coronavirus pandemic in March 2020. Regional Fed leaders must retire when they hit 65. If they join the central bank after the age of 55, they can be allowed to serve for 10 years, or until 75, whichever comes first. According to Brookings Institution data, the next regional Fed official who must exit due to age is Philadelphia Fed President Patrick Harker in June 2025. https://www.reuters.com/business/finance/cleveland-fed-begins-search-new-leader-mester-nears-retirement-2023-11-08/

2023-11-08 16:22

NEW YORK, Nov 8 (Reuters) - Fear has plunged in the U.S. equity market following last week's explosive rally, and some options mavens are urging clients to stock up on portfolio protection while it's cheap. The S&P 500 is up 6% from its October lows after notching its biggest weekly gain in nearly a year on expectations that the Federal Reserve is unlikely to raise interest rates further as it looks to engineer a so-called soft landing, where it is able to defeat inflation without badly hurting growth. Meanwhile, the Cboe Volatility Index (.VIX), known as Wall Street's fear gauge, has tumbled to its lowest level in seven weeks. The cost of hedging against a drop in stocks has also fallen, indicating limited demand for downside protection: investors looking to guard their portfolios against a 5% drop in the S&P 500-tracking SPDR S&P 500 ETF Trust (SPY.P) through the end of the year are paying about half of the price demanded just two weeks ago, a Reuters analysis showed. "We're seeing a market where everyone is almost presuming that we're going to have a soft landing, that there's going to be a Santa Claus rally through the end of the year," said Matthew Tym, head of equity derivatives trading at Cantor Fitzgerald, referring to the historically strong performance of U.S. stocks towards year-end. Strategists at Barclays also called out the dramatic drop in the VIX from October levels, which were the highest in seven months. Markets appear "too optimistic," the strategists said in a note on Tuesday. They recommended taking advantage of the drop in volatility to deploy stock replacement trades, which involve swapping long stock positions for cheap call options that would reap gains if the market continued to rally. Of course, there's no shortage of factors that could cause volatility to pick up again, from a rebound in Treasury yields that has weighed on equities since the summer to signs that the conflict in the Middle East is widening. The S&P 500 is up 14% year-to-date. "I'm looking at this market amazed and encouraging our clients to be at least buying protection here because it's inexpensive," Cantor's Tym said. "You can certainly sleep at night having protection on." At the same time, not everyone believes the lack of downside hedging is due to investor complacency. Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, believes investors are underexposed to stocks after cutting down positions as equities fell over the last few months. Investors' equity positioning fell to a five-month low before last week's rally, Deutsche Bank data showed. With investors less exposed to stocks, "they don't necessarily need to be rushing to get hedges now," Murphy said. https://www.reuters.com/markets/us/investors-spurn-options-hedges-us-stock-rally-crushes-fear-2023-11-08/

2023-11-08 15:02

MADRID, Nov 8 (Reuters) - Spain's stock market supervisor said on Wednesday it had opened its first case relating to a possible infringement of recent rules governing mass advertising campaigns for cryptoassets. The supervisor also said separately that it was analysing some advertisements carried on social media platform X, formerly known as Twitter, which was taken private by Elon Musk, for potential infringements. X did not immediately reply to a request for comment. Madrid took steps to regulate the rampant advertising of cryptoassets at the start of 2022, tasking the CNMV watchdog with authorising mass campaigns and making sure investors are aware of the risks involved. The CNMV said on Wednesday that it had opened disciplinary proceedings against Spanish technology provider Miolos S.L. over two mass campaigns advertising cryptoassets. It said this did not prejudge the final outcome of the investigation. Miolos did not immediately respond to an emailed request for comment on the CNMV's action. "This is the first sanctioning proceeding to be opened for non-compliance with the circular regulating the advertising of cryptoassets," Rodrigo Buenaventura, the supervisor's head, told a financial event on Wednesday. Buenaventura said this should serve as a reminder of the need respect the rules set out in the new regulations. The rapid growth of crypto and digital assets pegged to traditional currencies has drawn attention from regulators worldwide, who fear they could put the financial system at risk. The supervisor said it was investigating four possible serious infringements over failing to include information and warnings on the risks of the advertised cryptoassets and for not submitting prior notification. Buenaventura said the CNMV was particularly active in the fight against financial fraud involving cryptoassets. "In recent days we have detected advertisements on the social network X (formerly Twitter) promoted by an unauthorised entity," he said, adding that social media platforms were obliged to check if advertisers were on an authorised list. Advertisers and companies that market cryptoassets must inform the CNMV at least 10 days beforehand about the content of campaigns targeting more than 100,000 people. The new regulations came into effect in mid-February last year and allowed the CNMV to specifically monitor advertising for all cryptoasset types and to include warnings about risks. Spain's rules also apply to cryptoasset service providers when advertising their activities and to any person advertising on their own or on behalf of third parties. https://www.reuters.com/markets/europe/spanish-regulator-opens-first-cryptoasset-advertising-case-2023-11-08/