2024-07-05 11:00

LONDON/SINGAPORE, July 5 (Reuters) - Abu Dhabi National Oil Company (ADNOC) has earmarked a 40% stake in its Ruwais liquefied natural gas (LNG) project to four energy majors Shell (SHEL.L) New Tab, opens new tab, TotalEnergies (TTEF.PA) New Tab, opens new tab, BP (BP.L) New Tab, opens new tab, and Japan's Mitsui (8031.T) New Tab, opens new tab, sources told Reuters. The four companies are expected to get a stake of 10% each in the project which will more than double UAE's output of the sea-borne fuel and is expected to produce about 9.6 million metric tons per annum (mtpa) by late 2028, the sources said. One source said ADNOC plans to assign another 5% stake to another partner, without giving details. ADNOC has also allocated 2 mtpa to shareholders, another source said, speaking like others on condition of anonymity Due to sensitivity of the talks. The companies are expected to get the offtake at a lower price compared to the market, but with less flexibility, the source said. ADNOC, Shell and BP and TotalEnergies declined to comment. Mitsui did not immediately respond to request for comment. The project, which has received final investment decision for in June, is expected to be key for Shell and TotalEnergie's Middle East-Asia LNG trade. The state oil giant has big ambitions in gas and LNG, which along with renewable energy and petrochemicals it sees as pillars for its future growth. It currently produces around 6 mtpa of LNG and aims to lift its capacity to 15 mtpa. As demand for natural gas spiked following Russia's invasion of Ukraine, several Gulf countries have looked to capitalise. Qatar this year announced a further expansion of its North Field project that will cement it as one of the world's top LNG exporters. ADNOC has already signed supply deals with Germany's EnBW and Securing Energy for Europe (SEFE), as well as China's ENN Natural Gas. The project is expected to be the region's first LNG export facility to run on clean power. Sign up here. https://www.reuters.com/markets/commodities/adnocs-ruwais-lng-earmark-40-stake-shell-total-bp-mitsui-sources-say-2024-07-05/

2024-07-05 10:50

India dealers widen discounts to $11/oz Elevated prices dampen retail demand in country - Indian trader China gold activity shows weakness in retail, wholesale demand - traders July 5 (Reuters) - Physical gold dealers in India offered discounts for the ninth consecutive week due to high prices, as they await a potential import duty reduction in the upcoming budget, while top consumer China also saw weakness in demand. Gold demand in India, the world's second-largest gold consumer and a major importer, has slowed as rising prices deterred buyers who are awaiting a potential import duty cut in the upcoming budget. Domestic prices were trading around 72,600 rupees per 10 grams on Friday, after hitting a record high of 74,442 rupees in May. "Every year before the budget, jewellers speculate about possible duty cuts and avoid making purchases. This year is no exception,” said a Kolkata-based dealer. Prime Minister Narendra Modi's government is likely to present India's budget in July. Indian dealers offered a discount of up to $11 an ounce over official domestic prices – inclusive of 15% import and 3% sales levies, versus last week's discount of $9. "Elevated prices have dampened retail demand across the country. In rural areas, farmers are busy with crop sowing activities as rainfall has picked up," said a Mumbai-based dealer with a private bullion importing bank. India's annual monsoon rains covered the entire country on Tuesday, six days ahead of the usual time of arrival. In China, dealers charged premiums of $11-$24 per ounce over international spot prices this week, compared with $12-$23 last week. "Gold activity in China continues to highlight weakness in retail and wholesale demand, judging by latest data, as high prices weigh on it," Hugo Pascal, precious metals trader at InProved, said. Meanwhile, gold was sold at par to $3 premiums in Singapore and at par to $2 premiums in Hong Kong. "We are seeing greater customer interest in sales and inquiries in silver bars and coins, partly due to higher gold prices," said Vincent Tie, sales manager at Singapore dealer Silver Bullion. In Japan , bullion was sold at par to $0.50 premiums. Sign up here. https://www.reuters.com/markets/commodities/asia-gold-high-gold-prices-dull-activity-india-china-2024-07-05/

2024-07-05 10:37

LONDON, July 5 (Reuters) - Investors poured $19 billion into bond funds in the week to Wednesday, the biggest inflow since February 2021, as they locked in high yields, Bank of America said in a research note on Friday. Cash funds received $51.9 billion of inflows, BofA said, citing numbers from financial data EPFR, the largest inflow in two months. The yields available on fixed income assets have soared as central banks have hiked interest rates to tackle inflation, drawing investors to bonds and cash-like money market funds. BofA analysts said in the research note that investors were "locking in 'peak yields'" ahead of expected rate cuts later this year. After some signs of progress on inflation and a slowing in growth, financial markets expect the U.S. Federal Reserve to cut borrowing costs by around 0.5 percentage points this year. BofA said equity funds received their 11th straight week of inflows, at $8.1 billion, in the longest streak since Dec. 2021. It said U.S. large-cap equities - the largest companies in the American market - received their biggest inflow in 16 weeks at $16.6 billion. Sign up here. https://www.reuters.com/markets/rates-bonds/global-markets-flows-bofa-update-1-2024-07-05/

2024-07-05 10:25

LONDON, July 5 (Reuters) - North Sea oil and gas producers urged Britain's incoming Prime Minister Keir Starmer to provide clarity on his election promise to increase tax on the sector, warning it could lead to a rapid decline in output and revenue. Starmer's Labour Party swept to power in a parliamentary election on Thursday, ending 14 years of Conservative government. The party's manifesto promised to rapidly build up Britain's renewable power, partly by increasing taxes on its oil and gas sector. It also vowed to end issuing new licences in the North Sea basin. David Whitehouse, Chief Executive of industry body Offshore Energies UK, said the sector and investors were deeply concerned over Labour's plans. "These policies, if poorly managed, and without industry input, will threaten jobs and undermine the decarbonisation of the UK economy. The details matter," Whitehouse said in a statement. Labour said it will increase by 3 percentage points a windfall tax on energy producers first imposed in 2022 after energy prices spiked following Russia's invasion of Ukraine. The current 35% windfall tax, which will run until 2029, brings the total tax burden on producers to 75%, among the highest in the world. Labour also vowed to scrap the so-called investment allowance, which exempts most profits that are re-invested in oil and gas production, but provided little detail. David Latin, Chairman of producer Serica Energy (SQZ.L) New Tab, opens new tab, said that without clarity, investments and taxes from the sector would drop rapidly. "There's this misunderstanding which is that somehow we're a golden goose and we'll just keep laying eggs. But if you don't feed the goose with investment dollars, it'll keel over and there'll be no more eggs," Latin told Reuters. The windfall levy wiped out most profits for producers last year and many, including Harbour Energy (HBR.L) New Tab, opens new tab, the basin's largest producer, pared back investments and cut hundreds of jobs. Many of the producers are now looking to acquire assets beyond the North Sea. Gilad Myerson, former executive chairman of Ithaca Energy (ITH.L) New Tab, opens new tab, said Labour must choose between producing oil and gas locally or importing fuel. "The policies that Labour have suggested in their Manifesto will simply decimate the local industry and local production," Myerson told Reuters. "My only hope is that now they are in power they will revisit their energy policies and focus on making economically correct decisions." Sign up here. https://www.reuters.com/markets/commodities/north-sea-oil-producers-urge-labours-starmer-tax-clarity-2024-07-05/

2024-07-05 10:17

LONDON, July 5 (Reuters) - Lufthansa (LHAG.DE) New Tab, opens new tab sought to reassure investors about ITA's financial health on Friday after the German carrier won EU approval this week to buy 41% of the Italian airline, which remains under the shadow of its predecessor Alitalia. ITA Airways took to the air in 2021 and has since sought to shake off the troubled legacy of Alitalia, which burned through an estimated 10 billion euros ($10.8 billion) of state funds in its last 14 years. Once a symbol of glamour and style for Italy and a beacon of national identity, the government accepted that ITA, Alitalia's new configuration, needed strong ownership to survive. As part of the deal, Lufthansa will give itself two years to assess ITA's financial health before pushing for a full takeover, in a similar strategy to its takeover of Swiss Airlines and Brussels Airlines. "We only need to execute if it is economically viable, even though you can hear my optimism and the optimism of the whole group that this will be the case," CEO Carsten Spohr told a conference call for investors and analysts. It took the German airline group more than a year to win European Commission approval for its purchase of a stake in the Italian carrier, eventually agreeing to a number of concessions for which the details are still being ironed out. Spohr said he expected ITA's business costs to improve further, given the efficiency of Rome's Fiumicino Airport, and that the airline's leasing debt was not a major concern. On Thursday, Spohr told Italian media that Lufthansa could take a 90% stake in ITA as soon as next year. Lufthansa has faced its own financial struggles, recently reporting a profit warning ahead of first quarter earnings on the back of higher-than-expected strike costs. It also received financial help from the German government during the pandemic. Alitalia faced possible takeovers from numerous suitors, including Air France-KLM (AIRF.PA) New Tab, opens new tab, which did not materialise, and the carrier was bailed out repeatedly over decades. ($1 = 0.9239 euros) Sign up here. https://www.reuters.com/business/aerospace-defense/lufthansa-ceo-reassures-investors-ita-airways-financial-health-2024-07-05/

2024-07-05 10:09

NEW YORK, July 5 (Reuters) - A recalibration of how the U.S. presidential election plays out is causing bond investors to bet yields stay higher for longer as November approaches. Yields have risen sharply after President Joe Biden's stumbling performance against Republican rival Donald Trump in the first presidential debate last month, which increased speculation about a second Trump win when voters go to the polls on Nov. 5. The benchmark 10-year yield rose about six points to 4.34% following the debate. Some investors are betting on higher inflation under Trump because of trade and economic policies such as higher tariffs on imports, and profligate government spending along with lower tax revenues, which would boost fiscal deficits and U.S. debt levels. Trump's team has said his pro-growth policies would bring down interest rates and shrink deficits. Republican National Committee spokesperson Anna Kelly said in a statement that the market reaction to Trump's "debate victory reflected the anticipation of the strong-growth, low-inflation reality that President Trump will deliver once again." Some have said a reckoning on U.S. debt will eventually catch up with the country and market. "The lens (is) really starting to turn to the fiscal and the debt dynamics," said Mary-Therese Barton, fixed income chief investment officer at Pictet Asset Management. "(The) rate-cutting cycle is perhaps shallower than expected with a focus more on the longer end." Those concerns around widening fiscal deficits and the rising government debt burden threaten to limit any nascent rally in bonds, expected as the Federal Reserve gets closer to cutting rates after an aggressive hiking cycle to tame inflation. "We feel the probability of (a) Trump election victory has risen," John Velis, Americas macro strategist at BNY, wrote in a note. "Our faith in lower yields going forward has been eroded and we wouldn't be surprised to see a continuation of the very recent moves higher in yields." Shorter-dated Treasuries, more directly linked to changes in monetary policy, could still rally in case of rate cuts, but even for bond bulls the outlook for longer-dated Treasuries has become cloudier. Longer dated debt tends to reflect expectations for economic growth, inflation and the fiscal outlook. "The headwind that we've been seeing should start abating and we do think investors will start focusing more on the cutting cycle," said Anders Persson, chief investment officer and head of global fixed income at Nuveen. However, "that's probably going to show up more on the front end of the curve like the two-year for instance," he noted. "The 10-year will be a little bit trickier to call given the elections and if inflation is a little bit stickier." 'FRUSTRATION' Investors had bet heavily early this year on a normalization of interest rates, but that has sharply changed with the Fed increasingly being seen as pushing rate cuts out further. Traders of futures contracts tied to the Fed's policy rate are betting on about two rate cuts for the rest of 2024, one-third of the policy easing investors were hoping for in January. Bonds rally when rates are lowered because existing securities yield more than new ones and become more valuable. But as monetary easing has proven elusive, what appeared to be a straightforward trade as the year began has become a test of patience for investors. "I think there was some frustration with some people who took that big positioning," especially on behalf of clients, said Kevin McCullough, portfolio consultant at Natixis Investment Managers. "That's a real hard conversation to have." A measure of total returns for Treasuries since the beginning of the year remains in negative territory despite yields having declined from their annual peak in April. Year-to-date total returns, which include bond payouts and price fluctuations, were minus 0.6% as of Friday, the ICE BofA US Treasury Index (.MERG0Q0) New Tab, opens new tab showed. Returns have been negative since early February. Regardless of the election outcome, many investors are optimistic on bonds as yields have become more attractive in an environment of higher rates. "We still have six months left to carry in fixed income ... and obviously if yields move lower from here still, there's potential for even more appreciation," said Mike Cudzil, managing director and generalist portfolio manager at PIMCO, one of the world's biggest bond investors. On Friday, yields declined after closely-watched jobs data that appeared to show the U.S. labor market weakening. "Whoever wins the election, regardless if Republican or Democrat, the loser is going to be the deficit," said Cudzil. "I think what will matter more is the slowing of inflation, the slowing of growth." Sign up here. https://www.reuters.com/markets/rates-bonds/bond-market-re-focus-us-elections-throws-wrench-into-2024-rally-hopes-2024-07-05/