2024-08-02 06:24

PARIS, Aug 2(Reuters) - Engie (ENGIE.PA) , opens new tab cheered investors on Friday with a raised outlook buoyed by its flexible power services and despite a first-half fall in profit as gas prices came off year-ago highs. The French utility said it now expects a net recurring income on a group share basis this year of 5 billion euros to 5.6 billion euros ($5.41 billion to $6.06 billion), up from 4.2 billion to 4.8 billion. Its shares were up 4% in morning trading on the surprise forecast upgrade. FLEXIBLE POWER Regarding the outlook, CFO Pierre-François Riolacci said higher-than-expected volumes of rain in Europe had boosted hydropower volumes by 30% while more renewable energy capacity meant rising volatility, boosting demand for Engie's flexible generation unit. Its Flex Gen unit posted a 31.9% jump in earnings. "With the increased penetration of renewables there is more volatility in the market and therefore there is the ability particularly for our European gas plants to capture more value," Riolacci said. The company, which sells and trades electricity and gas, posted a 16.3% fall in first-half earnings before interest and tax (EBIT), excluding nuclear, to 5.6 billion euros ($6.05 billion). Profits a year ago at Engie, the largest gas network operator in Europe, had benefitted from high regional gas prices and volatility. The results were above expectations, said analysts at JPMorgan, with good performance across its businesses, and "exceptional performance" in flexible generation. EBIT at its Global Energy Management and Sales unit fell 38% to 1.95 billion euros as prices normalised and on milder winter weather. Its renewables business posted a 5.7% rise in earnings to 1.3 billion euros, buoyed by more rain in France and Portugal and new capacity in Latin America. EBIT from its Networks unit fell 12.7% on an organic basis due to smaller volumes of gas sent from France to Germany and lower distributed volumes in France due to mild weather. DISTRIBUTION ACQUISITIONS CEO Catherine MacGregor told analysts on a call that Engie continues to look "very carefully" at acquiring distribution assets, as part of a shift launched in 2021 to rebalance its business towards more power and less gas. Reuters reported last month that Engie had joined forces with Caisse de dépôt et placement du Québec (CDPQ), Canada's second-largest pension fund, to try to buy British power network Electricity North West (ENWL). MacGregor declined to directly confirm the report, but said the French company had submitted an offer to buy a UK asset that was rejected. "We will look out for similar opportunities but there are not that many," MacGregor said. ($1 = 0.9240 euros) Sign up here. https://www.reuters.com/business/energy/frances-engie-says-profits-fall-16-first-half-2024-08-02/

2024-08-02 06:02

LONDON, Aug 2 (Reuters) - Catch the cresting wave? After numerous bruising false starts, there's now a dash to lock onto what are still some of the highest government and corporate bond yields in 15 years before they evaporate as central bank easing finally gets underway in earnest. Emboldened by headline inflation back at target and likely tax rises from the new British government, the Bank of England narrowly voted for its first interest rate cut in four years this week. That cut came within 24 hours of the U.S. Federal Reserve signaling it was ready to likewise cut rates in seven weeks time. Although laced with "softly softly" rhetoric and caution about "data dependency", these two are merely catching up on the start already made by the central banks in the euro zone, Switzerland, Sweden and Canada. And with real inflation-adjusted policy rates rising sharply to their tightest levels since the global banking crash of 2008, labor markets loosening and manufacturing growth stalling, there appears to be a consensus that now is the time to move to ensure they are not scrambling later on if the economic slowdown snowballs. Short-dated government bonds are leading the charge. Two-year U.S. Treasury yields have clocked a cumulative 50-basis-point (bp) swoon in the space of a month to hit their lowest levels since February. Two-year UK gilt yields have shed as much in that time to plumb their lowest levels in more than year. But it occurred across the curve - with 10-year Treasuries losing their 4% handle for the first time in six months. Europe rallied in sympathy, with even recently edgy French 10-year government yields falling back below 3% for the first time since a contentious snap election was called there in June. And the widest sweep of global bond markets at large - the Bloomberg Multiverse index of government and corporate bonds - has seen implied yields plummet through 4% again to their lowest levels since early February. LEAK OUT THE CURVE There have been false dawns before of course. The combination of creeping industrial slowdowns and better-behaved inflation, and wariness of many pricey equity markets, means still-brimming coffers of cautious cash may now start to leak out as short-term money market rates tumble. The rush to secure a longer period of fixed returns in bonds while yields there are still historically high seems a likely first port of call. And there's still a lot of money in cash. According to ICI data, total assets in U.S. money market funds rose to the highest level on record this week at some $6.14 trillion - almost $1.6 trillion more than was there before the Fed started lifting rates in March 2022. The question is whether it's now worth shifting to what are now much lower longer-term yields. Anticipating a Fed move from its 5.38% policy mid-rate in September, three-month Treasury bill rates have slipped 10 bp over the month to 5.28% - but they remain 110 bp above fast disappearing two-year yield at 4.2%. And yet futures markets already price a likely series of Fed cuts ahead that would bring policy rates below the current two-year Treasury by March of next year - and two-year notes themselves would almost certainly be far lower by then if that scenario unfolded. All things equal, the current rates universe suggests a new two-year note bought today would yield more than a 3-month T-bill for 18 months of its maturity. Analysts at TS Lombard earlier this year calculated that current two-year yields are still attractive even if you assume the 200 bp of Fed easing in this cycle now priced by futures markets "normalizes" the yield curve and returns a premium on two-year yields over Fed policy rates to a 50-year average of 30 bp. And even if you think 200 bp sounds like a lot of easing, bear in mind that would still leave Fed policy rates at twice the 20-year average and almost 60 bp above what Fed policymakers see as long-term neutral - still 'restrictive' in the parlance of the U.S. central bank. The upshot is that the temptation to move cash holdings further out the curve may now prove irresistible and bond markets seem to see that wave coming at last. The opinions expressed here are those of the author, a columnist for Reuters. Sign up here. https://www.reuters.com/markets/rates-bonds/central-bank-dam-burst-may-see-dash-cash-mike-dolan-2024-08-02/

2024-08-02 05:48

NEW YORK/LONDON Aug 2 (Reuters) - Surprisingly weak U.S. employment data on Friday stoked fears of a recession ahead, prompting investors to dump stocks and turn to safe-haven bonds. Treasury prices surged, sending yields to multi-month lows. Oil price benchmarks fell by more than $3 per barrel at their session lows. The U.S. dollar index dropped over 1% to its weakest since March. Richly valued technology firms bore much of the pain, and an index of European bank stocks headed for its largest weekly decline in 17 months on soft earnings. The VIX stock market volatility measure (.VIX) , opens new tab, dubbed Wall Street's fear gauge, surged over 40%. Friday's U.S. jobs report showed job growth slowed more than expected in July and unemployment increased to 4.3%, pointing to possible weakness in the labor market and greater vulnerability to recession. Markets were already rattled by downbeat earnings updates from Amazon and Intel and Thursday's softer-than-expected U.S. U.S. factory activity survey in addition to the monthly U.S. non-farm payrolls report, which showed job growth slumped to 114,000 new hires in July from 179,000 in June. The data raised expectations of multiple rate cuts by the Federal Reserve this year, which just this week opted to keep rates unchanged. "The jobs data are signaling substantial further progress that the Federal Reserve made a policy error by not reducing the fed funds rate this week," said Jamie Cox, managing partner for Harris Financial Group in Richmond, Virginia. "It’s very possible the Fed alters its inter-meeting communications on the balance of risks to remove all doubt about a September rate cut. " With thin summer trading likely exaggerating moves, a slump that began in Asia with a 5.8% drop for Japan's Nikkei (.N225) , opens new tab, its biggest daily fall since March 2020 during the COVID-19 crisis, rippled through Europe and headed for Wall Street. MSCI's gauge of stocks across the globe (.MIWD00000PUS) , opens new tab fell 16.09 points, or 2.00%, to 787.31. The Nasdaq Composite (.IXIC) , opens new tab lost 417.98 points, or 2.43%, to 16,776.16. The index has fallen more than 10% from its July closing high, confirming it is in a correction after concerns grew about expensive valuations in a weakening economy. The Dow Jones Industrial Average (.DJI) , opens new tab fell 610.71 points, or 1.51%, to 39,737.26, the S&P 500 (.SPX) , opens new tab lost 100.12 points. Europe's STOXX 600 (.STOXX) , opens new tab fell close to 3%, with financials and technology the worst hit. Emerging market stocks (.MSCIEF) , opens new tab fell 24.30 points, or 2.23%, to 1,063.50. MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) , opens new tab closed 2.48% lower 2.48%, at 553.72, while Japan's Nikkei (.N225) , opens new tab fell 2,216.63 points, or 5.81%, to 35,909.70. The Fed has kept benchmark borrowing costs at a 23-year high of 5.25%-5.50% for a year, and some analysts believe the world's most influential central bank may have kept monetary policy tight for too long, risking a recession. Money markets on Friday rushed to price a 70% chance of the Fed, which was already widely expected to cut rates from September, implementing a jumbo 50 basis points cut next month to insure against a downturn. The "employment report flashes a warning signal that this economy does have the ability to turn rather quickly," said Charlie Ripley, Senior Investment Strategist for Allianz Investment Management in Minneapolis. "Ultimately, today’s employment data should embolden the committee to cut policy by more than 25 basis points at the next meeting." RUSH AWAY FROM TECH, TO SAFE HAVENS Shares in U.S. chipmaker Intel (INTC.O) , opens new tab tumbled to a more than 11-year low and finished down over 26%, after suspending its dividend and announcing hefty job cuts alongside underwhelming earnings forecasts. Artificial intelligence chipmaker Nvidia (.NVDA) , opens new tab, one of the biggest contributors to the tech rally, dropped 1.8% Up more than 700% since January 2023, Nvidia has left many asset managers with an outsized exposure to the fortunes of this single stock. Safe-haven buying went full throttle, with government debt, gold and currencies traditionally all rallying. They are assets viewed as likely to hold value during market chaos. The yield on benchmark U.S. 10-year notes fell 18 basis points to 3.798%. The 2-year note yield, which typically moves in step with interest rate expectations, fell 28.5 basis points to 3.8798%. In foreign exchange markets, the yen added nearly 2%, extending a rapid bounceback after the Bank of Japan raised interest rates to levels unseen in 15 years. In commodities, spot gold lost 0.37% to $2,436.31 an ounce and U.S. gold futures settled 0.4% lower to $2,4769.8. Oil prices took a hit on the growth worries, with global benchmark Brent futures settled down $2.71, or 3.41%, to $76.81 a barrel. U.S. West Texas Intermediate crude futures finished down $2.79, or 3.66%, at $73.52. Sign up here. https://www.reuters.com/markets/global-markets-wrapup-1-2024-08-02/

2024-08-02 05:16

ROME, Aug 2 (Reuters) - Italy's ITA Airways is suspending flights to and from Tel Aviv "due to the geopolitical developments in the Middle East and to ensure the safety of its passengers and crews", the airline said in a statement on its website. Flights have been suspended until Aug. 6, it added. A number of airlines have cancelled or suspended flights as Lebanon braces for retaliation from Israel since a strike on Saturday in the Israeli-occupied Golan Heights killed 12 children and teenagers. Hezbollah has denied blame. Sign up here. https://www.reuters.com/world/italys-ita-airways-suspends-flights-tel-aviv-until-aug-6-2024-08-02/

2024-08-02 05:08

MUMBAI, Aug 2 (Reuters) - The Indian rupee was nearly flat on Friday as likely intervention from the Reserve Bank of India helped the currency hold above its all-time low amid pressure from weakness in local equities, which declined tracking a sell-off in global peers. The rupee was at 83.7225 against the U.S. dollar as of 10:35 a.m. IST, nearly unchanged from its close at 83.7175 on Thursday. Benchmark Indian equity indexes, the BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab were down about 1% each, tracking a sell-off in global peers. U.S. stock futures also extended their declines, with Nasdaq futures down 1.3% while S&P 500 futures fell by 0.7%. Dollar bids from at least two large U.S.-based foreign banks, likely on behalf of custodial clients, pressured the rupee in early trading, a foreign exchange trader at a private bank said. The RBI likely sold dollars via state-run banks to support the local currency as it hovered close to its all-time low of 83.7450, traders said. Concerns about geopolitical tensions and a slowdown in the U.S. economy, in light of data that signalled an unexpected slump in U.S. manufacturing activity last month, drove U.S. bond yields lower. The 10-year U.S. Treasury yield hit a six-month low of 3.94% in Asia trading while the dollar index was at 104.3. Asian currencies were mostly up by 0.1% to 0.8%. "A return to broad-based USD weakness is still possible this month... but the (the dollar index) still needs to break below 104 first," DBS Bank said in a note. Meanwhile, dollar-rupee forward premiums rose with the 1-year implied yield up 4 basis points at 1.91%, its highest level in six months, lifted by the decline in US bond yields. Sign up here. https://www.reuters.com/markets/currencies/rupee-averts-record-low-likely-rbi-intervention-local-equities-slide-2024-08-02/

2024-08-02 04:40

A look at the day ahead in European and global markets from Rae Wee It's been a rollercoaster ride of a week and Friday is shaping up to be no exception for investors, with risk assets in particular set for a heavy beating when Europe wakes up. All it took was a softer-than-expected ISM report on U.S. manufacturing for markets to start fretting about the economic outlook and abandon their optimism over the Federal Reserve's signals on a September rate cut. The fear now is that the Fed may be behind the curve in easing rates, and traders have priced in an even greater chance of a 50-basis-point cut next month, versus the previous consensus of 25 bps. The new growth worries have triggered a sharp selloff in stocks, while the safe haven yen and Swiss franc scored solid gains. U.S. Treasury yields meanwhile slumped to their lowest in months, after the manufacturing data triggered doubts over whether the world's largest economy could achieve a much-anticipated soft landing. Lingering geopolitical worries also weighed down sentiment. The Israeli military said on Thursday, a day after Hamas' political leader was assassinated in Tehran, that the head of the group's military wing, Mohammed Deif, was killed in an Israeli airstrike in Gaza last month. With a light data calendar in Europe, that leaves the focus on tonight's U.S. nonfarm payrolls report, where a miss in expectations would only accelerate the risk retreat. Economists polled by Reuters expect 175,000 jobs to have been added in July, down from the previous month's 206,000. Eyes will also be on the unemployment rate, which is forecast to hold at 4.1%. Elsewhere, Japan's Nikkei (.N225) , opens new tab was headed for its worst day in more than four years, tracking Wall Street's slide and as a strengthening yen looked set to weigh on exporters' profits. How much further domestic rates could rise even in the face of a weakening economy also clouded the outlook. The latest yen rally, and in turn the Nikkei's decline, were triggered by the Bank of Japan's rate hike on Wednesday, part of Governor Kazuo Ueda's moves to dismantle his predecessor's unorthodox ultra-easy policies. Key developments that could influence markets on Friday: - U.S. nonfarm payrolls report (July) - Bank of England Chief Economist Huw Pill speaks - Exxon, Chevron report earnings Sign up here. https://www.reuters.com/markets/europe/global-markets-view-europe-2024-08-02/