AFP

European equities drifted higher Monday after Asian gains, as investors tracked the latest corporate and geopolitical news.

Markets brushed off weak Chinese data and comments indicating the Federal Reserve is wedded to its anti-inflation rate-hike campaign.

Investors in Europe were “happy to drift higher”, Markets.com analyst Neil Wilson told AFP.

He added that sentiment was partly “lifted” by news that the first shipment of Ukrainian grain since the Russian invasion had left the port of Odessa.

Asia-focused lender HSBC provided another boost with a “bullish” outlook, alongside its intention to revert to quarterly shareholder dividends next year.

HSBC shares jumped 7.1 percent to 550.30 pence in the British capital.

London stocks also rose despite expectations that the Bank of England would deliver a bumper 0.50-percentage-point interest rate hike this Thursday to combat rocketing inflation.

“Sharp hikes by the US Federal Reserve and European Central Bank in July make it all the more likely that it will pull the trigger on an outsize rate hike,” Wilson noted.

Global central banks are ramping up borrowing costs in an attempt to get a handle on runaway consumer price inflation.

– Weak China data –

Asian stock markets climbed, regardless of another disappointing reading on the health of the Chinese economy.

The closely watched Purchasing Managers’ Index of manufacturing activity shrank in July on the back of weak demand and the strict zero-Covid measures imposed in parts of the country.

While sweeping curbs have eased in major hubs such as Shanghai and Beijing, sporadic lockdowns in other cities and towns have kept businesses and consumers worried with few signs of the policy easing.

The China data sent oil prices sharply lower on revived demand concerns ahead of Wednesday’s OPEC scheduled output meeting.

Last week, strong earnings from US titans Amazon and Apple sparked healthy Wall Street gains and eased concerns about the economic impact of surging inflation and rising rates.

That came after investors took Fed chief Jerome Powell’s comments Wednesday to indicate the US central bank could start slowing down its monetary tightening, providing a much-needed boost to stocks.

– Key figures at around 1145 GMT –

London – FTSE 100: UP 0.5 percent at 7,463.86 points

Frankfurt – DAX: UP 0.6 percent at 13,559.63

Paris – CAC 40: UP 0.4 at 6,475.42

EURO STOXX 50: UP 0.5 percent at 3,726.74

Tokyo – Nikkei 225: UP 0.7 percent at 27,993.35 (close)

Hong Kong – Hang Seng Index: UP 0.1 percent at 20,165.84 (close)

Shanghai – Composite: UP 0.2 percent at 3,259.96 (close)

New York – Dow: UP 1.0 percent at 32,845.13 (close)

Euro/dollar: UP at $1.0251 from $1.0228 Friday

Pound/dollar: UP at $1.2240 from $1.2189 

Euro/pound: DOWN at 83.76 pence from 83.89 pence

Dollar/yen: DOWN at 132.25 yen from 133.25 yen

Brent North Sea crude: DOWN 1.3 percent at $102.63 per barrel

West Texas Intermediate: DOWN 2.0 percent at $96.62 per barrel

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A US envoy on Monday expressed optimism that Lebanon and Israel could move towards a maritime border deal to settle competing claims over offshore gas fields.

The dispute escalated in early June after Israel moved a production vessel near the Karish offshore field, which is partly claimed by neighbour Lebanon.

This prompted Beirut to call for the resumption of US-mediated negotiations on the demarcation dispute.

“I remain optimistic that we can make continuous progress as we have over the last several weeks and I look forward to coming back to the region and being able to make the final arrangements,” Amos Hochstein told reporters after meeting Lebanon’s top leaders.

Hochstein, on his second visit in less than two months, is carrying an Israeli proposal in response to a demarcation offer made by Lebanon.

On Monday, he met with President Michel Aoun, Prime Minister Najib Mikati and Parliament Speaker Nabih Berri at the presidential palace.

Lebanon is looking to clinch “a deal that preserves its rights and its wealth and that could provide, as soon as negotiations are over, an opportunity to revitalise the economy,” Aoun said before Monday’s meeting.

Lebanon and Israel have no diplomatic relations and are separated by a UN-patrolled border. 

They had resumed maritime border negotiations in 2020 but the process was stalled by Beirut’s claim that the map used by the United Nations in the talks needed modifying.

Lebanon initially demanded 860 square kilometres (330 square miles) in the disputed maritime area but then asked for an additional 1,430 square kilometres, including part of the Karish field.

Israel claims that the field lies in its waters and is not part of the disputed area subject to ongoing negotiations.

– ‘Pay dearly’ – 

A Lebanese official in mid-June said Beirut had made a new offer to Hochstein, holding back on demands for territory where Israel planned to imminently extract gas.

Beirut was pushing for the country’s maritime border to exclude Karish and include the whole of a nearby field instead, the official told AFP at the time.

An Israeli official on Sunday said Israel’s offer, which related to the original disputed zones, was a “compromise to both sides” and would allow Lebanon to develop “the Sidon reservoir”, known as the Qana field, while safeguarding Israel’s interest.

On July 2, Israel said it had downed three drones launched by Lebanon’s Iran-backed Hezbollah that were headed towards the Karish gas field.

The Iran-backed Shiite Muslim movement on Sunday released a short video it said showed surveillance of several Israeli-chartered energy infrastructure ships, including the production vessel sent to Karish which is operated by London-listed firm Energean.

Hezbollah’s chief Hassan Nasrallah had threatened attacks if Israel proceeds with gas exploration in the disputed area.

On Sunday, he said he was trying to “strengthen” Lebanon’s negotiating power and said that his party will determine its next step based on the outcomes of Monday’s talks.

“We’re paying no attention to Nasrallah’s threats and they’re not a factor in the negotiations,” Ram Ben Barak, head of the Israeli foreign and defence committee told public broadcaster Kan radio on Monday.

“But if Nasrallah dares to do anything to Israel’s gas rigs, Lebanon –- and Hezbollah -– will pay dearly.”

Israel and Hezbollah last fought a devastating war in 2006.

HSBC bank on Monday said pre-tax profit fell in the first half, and appeared to rebuff calls to spin off its Asian activities on the eve of a key shareholder meeting.

Pre-tax earnings sank 15 percent to US$9.2 billion after it took a $1.1-billion hit on possible credit losses “to reflect heightened economic uncertainty and inflation”, HSBC said.

The result “reflected a more normalised level of expected credit losses compared with the Covid-19 releases made last year, as well as the macroeconomic impact of the Russia-Ukraine war”, added Chief Executive Noel Quinn.

However, net profit rose 14 percent to US$8.3 billion in the reporting period partly on a large one-off tax credit.

– Quarterly dividends –

The annual revenue outlook was positive, Quinn noted, with net interest income expected to reach at least US$31 billion this year and US$37 billion next year as interest rates rise.

The group was confident of achieving its best returns in a decade in 2023.  

“We also intend to revert to quarterly dividends in 2023,” he added.

London-headquartered HSBC was among a number of major banks to cancel dividends early in the pandemic after a de facto order from the Bank of England — a move that upset some Hong Kong investors.

Monday’s results come one day before HSBC executives’ first face-to-face meeting with shareholders from the Asian financial hub in three years.

– Asia spin-off demands –

Executives are expected to field questions about a restructuring bid from its biggest shareholder Ping An Insurance Group.

The lender is under pressure from Ping An, which has a 9.2-percent stake, to spin off its Asian operations, in a bid to unlock shareholder value amid tensions between China and the West.

The bank has previously hinted it wants to keep its current structure while continuing a pivot to Asia.

Quinn, speaking later on Monday, suggested such an “alternative structure” would have a “negative” impact on HSBC.

“It has been our judgment that alternative structural options will not deliver increased value for shareholders,” Quinn told analysts on a conference call.

“Rather, they would have a material negative impact on value.”

HSBC had “considered many of these options over recent years”, and recently updated its analysis with third-party financial and legal advice, he added.

Hong Kong politician Christine Fong said on Sunday that HSBC separating its Asian business and bringing back its primary listing to the city is the “best way to protect (the interests of) minority shareholders”.

Fong, who reportedly represents 500 small investors in HSBC stock, also voiced support for Ping An getting seats on HSBC’s board, citing the cancelled dividends in 2020 as a reason.

Last year, HSBC vowed to accelerate a multi-year pivot to Asia and the Middle East, with ambitions to lead Asia’s wealth management market.

The bank said it would invest $6 billion in Hong Kong, China and Singapore and hire more than 5,000 wealth advisers — while slashing 35,000 jobs and cutting its retail operations in the United States and France. 

Hong Kong has tipped back into a technical recession, new government figures showed Monday, weighed down by mounting interest rates, weakened global trade and the city’s continued adherence to strict coronavirus controls.

Following a year-on-year decrease of 3.9 percent in the first quarter of 2022, the city’s GDP again reported decline in the second quarter on Monday — but with a narrower margin of 1.4 percent — according to advance estimates released by the Census and Statistics Department. 

The downturn is reversing last year’s recovery when the economy enjoyed a 6.3 percent annual growth after the slowdown in 2019 and 2020, when the city was first upended by months of huge, sometimes violent pro-democracy protests, and then the pandemic.

The Hong Kong government said the economic improvement was smaller than expected due to weak performance in external trade.

Official statistics released last month showed the value of total exports of goods in the second quarter decreased by 4.2 percent compared with the preceding quarter. 

For the first half of 2022, a visible trade deficit of $206.1 billion, equivalent to 8.2 percent of the value of imports of goods, was recorded.

“Weakened global demand and continued disruptions to cross-boundary land cargo flows between the mainland and Hong Kong weighed heavily on Hong Kong’s exports,” the government said Monday.

Monetary policy tightening by major central banks around the world is expected to dampen global economic growth significantly while quarantine-free travel between Hong Kong and mainland China is yet to have a clear timetable under Beijing’s strict adherence to its zero covid policy.

The financial hub’s new leader John Lee said his government would soon announce further shortening of mandatory hotel quarantine for overseas arrivals, according to an interview with the Hong Kong Economic Journal published on Monday.  

“Connecting with the world and with the mainland, we shall do both and they are not contradictory,” Lee told the newspaper. 

“I understand that one of Hong Kong’s competitiveness lies in its international connections.” 

In following China’s zero covid policy, Hong Kong has been largely cut off from the rest of the world for more than two years. 

It still has some of the world’s strictest restrictions, including week-long quarantine for arrivals and a ban on group gatherings with more than four people.

Local media recently reported that the government was mulling resuming quarantine-free travel for overseas arrivals in November, when the city is hoping to resuscitate its international image with a finance summit and the Hong Kong Rugby Sevens. 

Families embraced and cried tears of joy Monday as they reunited at Tonga’s airport — the inaugural arrivals to the Pacific nation after it lifted Covid restrictions for the first time since the pandemic struck.

After Tonga shut its borders in March 2020, the government had tightly controlled a select list of people who were approved to fly into the kingdom — leaving over 3,000 Tongans stuck overseas.

But with restrictions lifted, Monday’s first batch of tourists and returning Tongans — greeted with colourful garlands and serenaded by a band at the Fua’amotu International Airport — will not have to undergo quarantine. 

The first plane to land was an Air New Zealand flight from Auckland carrying around 200 passengers.

“It’s good to be back,” said ‘Etu Palu, eager to see family again with his mother Finau Palu, who said it was “good to visit the motherland!”

Another passenger, Siosaia Filikitonga, said this was his first visit to Tonga in more than two years because of the pandemic.

“I am happy and emotional. Once Tonga announced the border re-opening, I booked to come,” Filikitonga told AFP.

Amid the reunions, Sione Moala Mafi, CEO of Tonga’s Ministry of Tourism, said the visitors bring an important boost to the Pacific Kingdom’s economy.

“I’m so glad that the border’s open and that facilitates the travel between Tonga and the outside world, especially, New Zealand,” he said.

“I can see there are a lot of foreign visitors are arriving on the flight as well as Tongans.”

More flights, one from New Zealand and one from Australia, are expected later this week with planes from Fiji also due Tuesday and Saturday.

“We are happy to welcome them,” Moala Mafi added.

– No super yachts –

Despite its reopening, Tonga is taking a cautious staged approach by limiting the number of incoming flights this month under a framework announced by the Prime Minister’s Office on July 22.

They will review the number of flights and cruise ships for September and October, and all incoming passengers must be vaccinated and have negative COVID-19 tests before departure and three to five days after arrival.

Currently the government’s National Emergency Management Committee has set the current level to “orange”, but Moala Mafi said it looks like “we are progressing towards” going “green”.

“Orange now and it has to be reviewed at the end of this month,” he said.

So far, yachts and super yachts are not included in the border re-opening, much to the frustration of tourism operators, who say July, with its fantastic weather, is the peak season in Tonga.

“I’ve got 20 boats sitting in Tahiti that want to come to Tonga. Big boats, I’m not talking about little yachts, because they won’t let the yachts come back in here and I don’t know why,” said David Hunt, owner of Super Yacht Services Tonga.

He was waiting at the airport to meet a yacht owner who had not seen his yacht moored in Vava’u —  one of Tonga’s islands — for over three years.

“Before the pandemic, we were averaging about 30 to 35 yachts a year between operators, but it could be much more this year,” he said.

“They’ve got all these boats coming down to the Pacific they don’t want to be in Ukraine, in the Mediterranean.”

Moala Mafi said the government is still undecided on yachts in Tongan waters.

“We are still finalising the policy framework for the cruise ships,” he said. “We don’t forget them, but they are in the pipeline.”