2024-08-15 06:14

LITTLETON, Colorado, Aug 15 (Reuters) - Investors in the clean energy sector have taken a drubbing from steep drops in solar stocks this year, but have made strong returns on positions in utilities, which have been one of the brightest spots in the United States equities arena in 2024. Surging demand for power from artificial intelligence (AI) applications and data centers have spurred investments across the utilities and power producer space, which is set to see rising revenues from all major customer segments going forward. Some utilities stocks have outshone even the brightest stars of the tech arena, with Texas-based power producer Vistra Corp outperforming microchip major Nvidia (NVDA.O) , opens new tab since March. Equity analysts are upbeat on the outlook for utilities for the rest of the year, especially if U.S. interest rates are lowered and reduce the cost of debt financing for infrastructure development, service expansions and grid upgrades. That positive forecast contrasts with that of the solar industry, which was rocked by a high-profile bankruptcy this month that may spark a pivot by clean energy investors into the utilities arena instead. DIVERGENCE The bankruptcy filing by SunPower (SPWR.O) , opens new tab is just the latest blow to the solar arena. The 40-year-old firm boasted a market capitalization of over $9 billion in early 2021, but agreed to sell off the bulk of its assets for $45 million in cash this month after racking up billions of dollars in debt. Solar installation firms have been hit over the past two years by rising interest rates that lifted system prices for potential buyers, steep cost inflation for parts and labour, and cuts to power sale prices in key markets. And the pain of the solar sector stretches well beyond the U.S., with Israeli firm SolarEdge and China's Longi both announcing layoffs this year. The price of the largest U.S. solar exchange-traded fund (ETF) - the Invesco Solar ETF - has lost 24% so far this year in reflection of the sector's woes, and is down 55% since August 2022. In contrast, the largest utilities ETF, the Utilities Select Sector SPDR Fund , has gained roughly 18% year-to-date, which is more than the gains posted by the popular Vanguard Information Technology ETF over the same period. NUCLEAR GROWTH The upswing in utility share prices extends well beyond Vistra, with Constellation Energy (CEG.O) , opens new tab and NRG Energy both posting gains of well over 50% year-to-date. Nextera Energy , Southern Company and American Electric Power Company (AEP.O) , opens new tab have all gained around 20% this year, and may make further progress if investors in the solar sector pull up stakes and opt to switch holdings to utilities instead. Exactly which companies are targeted by investors in the utilities arena may depend on the proportion of power generated by nuclear plants within each power system. So far this year, the shares of Vistra and Constellation have outperformed the rest of the sector because both companies generate a larger share of total power supplies from nuclear reactors than their peers. Utilities with large nuclear fleets are attractive to power-hungry firms because nuclear plants can deliver large and stable volumes of clean power around-the-clock, and so can fulfil the demand needs of companies that require massive computing power. However, power producers that are building out renewable energy generation capacity as well as battery storage systems will also likely be on the radars of power consumers that need abundant clean electricity supplies. That means that utilities that may lack nuclear generation but have plans for large increases in alternative forms of clean generation could see a rise in demand for power going forward. Equity analysts have flagged firms including NiSource , which has a service area spanning from Pennsylvania to Ohio, and Florida-based NextEra as firms with strong growth potential thanks to rising revenues and established plans to bring on more renewable power this decade. Duke Energy , which has a large generation footprint in the Carolinas, and Southern Company, which operates across Georgia, Alabama and Mississippi, are also regularly touted by stock analysts in the utilities space. Investors opting for basket exposure through an ETF also have plenty to choose from, with Vanguard, S&P Global, Fidelity, and Invesco all also offering dedicated utility ETFs. Given that clean energy investors are nursing losses in the solar space for the second straight year, some may be tempted to steer funds elsewhere in the energy sector where the outlook is far more upbeat. And given that nearly all utilities are developing and integrating growing volumes of clean power into their distribution systems, many will fulfil the criteria for clean energy investors even if they are not purely dedicated to renewable energy production. The opinions expressed here are those of the author, a columnist for Reuters. Sign up here. https://www.reuters.com/business/energy/utilities-give-clean-energy-investors-boost-over-solar-maguire-2024-08-15/

2024-08-15 06:11

SYDNEY, Aug 15 (Reuters) - Australia will guarantee flights on Regional Express Holdings (REX.AX) , opens new tab airline for those booked on regional routes, but not between state capitals, the transport minister said on Thursday, weeks after it entered administration and cut hundreds of jobs. Traditionally focused on servicing Australia's vast regional areas with small planes, Rex appointed administrators last month, becoming the second airline in Australia to do so this year. Transport Minister Catherine King said on Thursday the government will guarantee that passengers with regional flight bookings with Rex will either fly or get their money back throughout the voluntary administration process. "Rex’s continuation is in the best interests of Australia – and the government is working closely with the administrators to ensure a strong regional aviation presence now and into the future," she said in a statement. The airline carries passengers and freight on 41 routes to regional and remote communities, including 21 routes that are only serviced by Rex, she added. Rex also has some larger jet flights in the lucrative "golden triangle" between Sydney, Brisbane and Melbourne, which will not be guaranteed by the government. The airline's collapse, which comes only three months after budget airline Bonza closed down, has put a spotlight on the barriers smaller players face breaking into the vast, sparsely populated market, that is dominated by national carrier Qantas (QAN.AX) , opens new tab and Virgin Australia. Sign up here. https://www.reuters.com/business/aerospace-defense/australia-guarantee-regional-flights-stricken-airline-rex-2024-08-15/

2024-08-15 05:21

Annual underlying profit soars 58% FY25 Energy Markets EBITDA forecast to fall Costs, lower electricity prices to weigh in FY25 Shares dip nearly 10% to a 4-month low Aug 15 (Reuters) - Shares in Australia's Origin Energy (ORG.AX) , opens new tab crashed 9% on Thursday despite reporting a 58% jump in full year profit, with investors reacting to higher costs and a warning that profit in its electricity generation business would fall in fiscal 2025. The country's second-largest power producer expects a pre-tax measure of earnings in its Energy Markets division to drop as much as a third as state-set electricity prices decline and the coal that fires a large power station gets more expensive. The company also reported that costs in the division rose 40% to A$748 million in the year ended on June 30 as bad debts and labour costs spiralled. Origin said it expected those costs to modestly improve this year. Origin shares were down 9.7% at A$9.58 at 3:12 p.m. (0512 GMT), while the broader benchmark (.AXJO) , opens new tab rose 0.2%. CEO Frank Calabria said he hadn't spoken to investors about the results but that the company remained focused on delivering on its strategy. "I expect it's about energy markets outlook relative to expectations, but I'll learn more, the market will react the way it reacts," he said in an interview. "In the meantime we're very much focused on delivering our results, executing our plans." Origin forecast underlying earnings before interest, taxes, depreciation and amortization (EBITDA) for its Energy Markets division in fiscal 2025 at A$1.1 billion to A$1.4 billion ($724 million and $921 million), down from A$1.66 billion reported on Thursday. Analysts at UBS said the midpoint of the unit's guidance for fiscal 2025 is 13% lower than consensus estimates. Origin reported A$1.18 billion in underlying profit for the year ended on June 30, up from A$747 million a year ago. But it missed an LSEG estimate of A$1.34 billion. The result benefited from a big jump in electricity prices and a temporary cap on coal prices that restrained fuel costs. Output rose at Origin's Eraring coal power plant, Australia's largest, where the government in May agreed to underwrite losses in exchange for Origin keeping the plant open for an extra two years to guarantee energy security. The company said its annual performance was also helped by higher production and greater hedging earnings in its Integrated Gas business, where its owns a 27.5% stake in the Australia Pacific Liquefied Natural Gas (LNG) project. The Sydney-based company declared a final dividend of 27.5 Australian cents per share, compared with 20 Australian cents a year earlier. ($1 = 1.5202 Australian dollars) Sign up here. https://www.reuters.com/business/energy/origin-energy-annual-profit-soars-shares-slip-bleak-electricity-outlook-2024-08-15/

2024-08-15 05:01

Big investors wary after rout Buy-the-dip mentality replaced by fear -investors Caution spans U.S. economy, global consumer and yen carry trade Pension funds could be next to sell, Goldman says LONDON, Aug 15 (Reuters) - Big investors are bracing for this summer's stock market rout to run into the autumn, fearing a broader wave of selling will follow the turmoil sparked by U.S. recession concerns and the Bank of Japan wrong-footing currency speculators. The sudden reversal of crowded equity and foreign exchange trades that generated vicious feedback loops of price drops, volatility and hedge fund selling has eased, with world stocks almost 2% higher so far this week (.MIWO00000PUS) , opens new tab. But asset managers overseeing hundreds of billions of dollars of investments said they were more likely to carry on selling stocks than buy back in, with signs of weakness in the U.S. jobs market and global consumer trends lowering the bar for market aftershocks. The buy-the-dip mentality, where investors typically respond to selloffs by making recovery bets, has been replaced by fear. "It's not simply now a large financial market accident, which maybe we could describe last week as. It's broader than that," said Mahmood Pradhan, a former IMF deputy director and head of global macro at the research arm of Amundi, Europe's largest fund manager. He expects investors, who according to Bank of America have already cut equity positions and shifted increasingly into cash, to remain cautious. Michael Kelly, head of multi-asset at PineBridge Investments, which oversees around $170 billion of client funds, is among those to have reduced his funds' stock market positions and he may pull back further. "It's going to be very, very volatile in the next two months," he said. A first U.S. rate cut, expected next month, might be too late to rescue the economy, he added. Investors' global growth expectations have fallen to eight-month lows. WHO SELLS NEXT? A weak U.S. employment report and a shock BOJ rate hike drove the global stock market selloff as volatility linked and trend-following hedge funds headed for the exits and anxious investors herded into government bonds. The BOJ hike wrecked billions of dollars worth of previously profitable trades where speculators had borrowed yen cheaply to buy higher-return assets like U.S. tech stocks. About 70% of that carry trade has now been unwound, JP Morgan estimates. But money flows tied to yen-related positions are tough to measure and Amundi's Pradhan said the possibility of further unwinding is making people quite risk averse. UBS European equity strategy head Gerry Fowler said hedge fund selling was likely over but slower moving mainstream investment managers often take four-to-six weeks to adjust their portfolios. Those fund managers could be the next to sell, said Edmond de Rothschild Investment Partners multi-asset portfolio manager Marie de Leyssac, but would do so based on economic data. While she doesn't see a savage U.S. slowdown as likely, she wasn't buying stocks, instead preferring put options, which insure against equity losses by paying out when markets fall. Pension funds would also further sell equity exposure and move into fixed income, Goldman Sachs strategist Scott Rubner said in a note, adding that the second half of September has been the worst period of the year for Wall Street since 1950. TURBULENCE Russell Investments chief U.S. investment strategist Paul Eitelman said another weak U.S. jobs report would have the potential to spark fresh volatility. Federal Reserve chair Jerome Powell's speech at next week's annual Jackson Hole central bank conference and artificial intelligence giant Nvidia's (NVDA.O) , opens new tab Aug. 28 earnings report are other market risk events. "Volatility makes it hard to increase exposure even if you think it fundamentally makes sense," Pictet Asset Management senior multi-asset strategist Arun Sai said. Money managers' risk mandates tend to prevent them from buying equities when prices are fluctuating widely. The VIX (.VIX) , opens new tab measure of expected volatility on Wall Street's S&P 500 and its European equivalent (.V2TX) , opens new tab hit multi-year highs last week before easing but a related index continues to send warning signals. The VVIX (.VVIX) , opens new tab, another options market gauge that rises when traders expect the VIX itself to be turbulent, is trading above the 100 mark, suggesting the market's wild ride is not yet over. "Until you see the VVIX get below 100 you should have it on your radar. It is the key metric at this point," Citi's head of equity trading strategy Stuart Kaiser said. Sign up here. https://www.reuters.com/markets/summer-market-shock-not-quite-over-investors-brace-more-turmoil-2024-08-15/

2024-08-15 04:50

LAUNCESTON, Australia, Aug 15 (Reuters) - Even though its imports of crude oil fell to the lowest in almost two years in July, China continued to boost stockpiles in July as refinery throughput fell for a fourth month. China, the world's biggest oil importer, added about 280,000 barrels per day (bpd) to either commercial or strategic inventories in July, according to calculations based on official data. This was down sharply from June's addition of 1.48 million bpd, but this still appears bearish when viewed against the fact that crude oil imports dropped to the lowest in July since September 2022. China doesn't disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of crude processed from the total of crude available from imports and domestic output. China's refineries processed 59.06 million metric tons of crude in July, equivalent to about 13.91 million bpd, according to data released on Thursday by the National Bureau of Statistics. This was down 6.1% from the same month last year and was the weakest month on a barrels-per-day basis since October 2022. Crude imports were 9.97 million bpd in July and domestic output was 4.22 million bpd, given a total of 14.19 million bpd available to refineries. Subtracting the volume processed of 13.91 million bpd leaves a surplus of 280,000 bpd. For the first seven months of the year China's surplus crude amounted to 800,000 bpd. Oil imports from January to July were 10.89 million bpd and domestic output was 4.28 million bpd, giving a total of 15.17 million bpd available to refiners, of which they processed 14.37 million bpd. The overall picture that emerges from China crude imports and refinery processing is that the country's oil sector is unabashedly soft. Imports have been trending weaker, as has refinery throughput, and this has allowed stockpiles to continue to grow. OPTIONS The addition of more crude into storage will also allow China's refiners the option of further trimming imports should crude prices start to rise again in the event of an escalation in geopolitical tensions, faster demand growth in the rest of the world or further supply tightening by the OPEC+ group. Of the three above factors that could increase oil prices, the risk of worsening situations in the current Middle East and Russia-Ukraine conflicts is the most realistic. Demand growth around the world remains muted and OPEC+ is still slated to start withdrawing some of its output cuts from October onwards, although the group has said it can revisit this decision if market conditions aren't as it expected. There are already some signs that OPEC+ is re-evaluating its bullish forecast for China's demand growth in 2024, with the Organization of the Petroleum Exporting Countries (OPEC), which forms the OPEC+ group along with allies including Russia, making a small cut to its China demand estimate in its latest monthly report. OPEC expects China's oil demand will rise by 700,000 bpd in 2024, accounting for one-third of the global increase. The August forecast for China's demand growth is just 60,000 bpd below OPEC's previous estimate. With crude imports and refinery processing contracting so far this year, it's hard to see how any rebound could be strong enough to meet OPEC's forecast, which is still strong despite the small downward revision. The International Energy Agency (IEA) is more cautious on China's demand growth, saying it will account for about one-third of the global total of 950,000 bpd in 2024. This means the IEA expects China's oil demand growth to be about 313,500 bpd in 2024, which also seems optimistic given the data for the first seven months of the year. The opinions expressed here are those of the author, a columnist for Reuters. Sign up here. https://www.reuters.com/business/energy/china-boosts-crude-oil-stockpiles-july-amid-weak-refining-russell-2024-08-15/

2024-08-15 04:34

A look at the day ahead in European and global markets from Kevin Buckland This week, and this month, are once again showing that data is king, with investors parsing recent economic releases for clues on the likely pace of interest cuts at the Federal Reserve and the Bank of England. Potential flashpoints for policy expectations loom for the currency markets on Thursday, when U.S. retail sales and Britain's GDP are due for release. The dollar and the pound could move sharply in either direction, depending on the results. Mild readings for U.S. inflation this week have cemented market certainty that the Fed will lower borrowing costs in September for the first time in 4 1/2 years, but debate still rages over whether policy makers will opt for a super-sized 50 basis-point reduction or a more standard quarter-point cut. Minds can change quickly, though. The estimated chance of a 50 bp cut fell to 36%, down from 50% just a day earlier, after the mild but potentially sticky CPI. It had risen to 71% early this month when surprisingly weak U.S. payrolls data roiled global markets across asset classes. Today, it's retail sales - a key indicator considering that consumption accounts for about two-thirds of U.S. economic growth. We'll also hear from some regional Fed officials, with St. Louis chief Alberto Musalem and Philly boss Patrick Harker on the speakers' list. The dollar sagged overnight against the euro to its lowest since the end of last year. Sterling was even softer, sagging some 0.5% versus Europe's shared currency. The culprit was a softer-than-expected UK consumer inflation reading that stoked speculation of faster and deeper BoE rate cuts. Up later in the day are GDP estimates and a parade of other data, including industrial output. Traders are split on the chances of another rate reduction by the BoE a month from now, after it kicked off a rate-cutting campaign earlier this month in a close-call decision. On the more immediate horizon, the Norges Bank announces policy today, with officials widely expected to delay any easing as they fret about spurring additional weakness in the Norwegian krone. Key developments that could influence markets on Thursday: -UK GDP, services, industrial output, manufacturing output -Norges Bank policy decision -US retail sales, industrial production, initial jobless claims, Philly Fed business index Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-08-15/