US Business

With prices falling and ports clogged with liquefied natural gas tankers, fears of a winter heating crisis in Europe have eased but experts are warning against complacency.

For over a week now, there have been bottlenecks at Spanish ports of ships bringing in LNG, indicating Europe is at full capacity.

Spanish gas regulator Enagas says the backlog at ports is expected to last at least until this week.

The Dutch TTF, a leading European benchmark price, is now close to its lowest level since June, at under 100 euros per megawatt hour at the end of October.

Its price has fallen more than 60 percent since a massive surge in August when Russia’s disruptions to its supply via the Nord Stream pipelines alarmed markets.

TTF’s short-term futures price even briefly went negative last week, for the first time since October 2019. In the United States, gas prices have also fallen sharply.

The days of stratospheric price rises of up to 350 euros per megawatt hour in Europe in March, a few days after Russia’s invasion of Ukraine began, seem to be well and truly in the past.

Since then Europe has made efforts to fill its storage facilities to reduce dependence on Russian gas and sought alternative suppliers, holding crisis meetings and calling for a cut in domestic usage.

– ‘Not out of woods’ –

The strategy has paid off with Europe’s storage reserves now at over 90 percent.

“Since Q1 2022, the EU has benefited from very strong LNG inflow primarily from the US,” analysts at broker Marex said in a note.

Georgi Slavov, head of research at Marex, told AFP that Europe is currently seeing an oversupply of gas but “it is premature to declare victory on that front”.

He said the current abundance is down to factors including unusually warm temperatures, which mean Europeans are not using gas for heating.

In addition the “economic slowdown is limiting gas use,” Slavov said, and “self-imposed restrictions on gas consumption also help enormously”.

A cold winter and industry shifting back to higher energy use could quickly reverse the trend.

“The continent is not out of the woods yet,” said Nikoline Bromander, an analyst for Rystad Energy. 

“With Russian flows continuing to decline, winter 2023 will be even tougher.”

The price for European natural gas is still fluctuating at a very high level, up more than 80 percent since the start of the year. 

– Short-term imbalance –

And “the price curve will not fall into negative in the US or in Europe”, said Eli Rubin of EBW Analytics Group.

A similar situation happened to US crude at the height of the Covid-19 pandemic when demand plummeted and the glut in supply led to a frantic race to stock up.

“Storage, which is the balancing mechanism between supply and demand, normally mops up the excess supply,” said Slavov.

The benchmark WTI crude oil prices then plummeted into negative values as investors were ready to pay not to have barrels of oil due to lack of storage space.

But with gas “we are talking about short-term imbalances that have a short-term effect on the price,” mainly concerning immediate deliveries, said Rubin.

Spain is seeing the same situation, with the waiting tankers indicating a temporary bottleneck, not a fundamental imbalance between too abundant supply versus demand.

This happens “every year” as winter approaches and is a localised issue off the coast of Spain, said Vincent Demoury, general delegate of GIGNL, the International Group of Liquefied Natural Gas Importers.

Spain has six LNG terminals, more than any other European country, where 108 ships unload every week.

Spain also has 44 percent of the EU’s gas storage capacity, according to Enagas.

Demoury say the fall in gas consumption and the high level of gas stocks for winter mean there are no more “available slots in Europe in November” to unload ships.

It is not the case that Europe is drowning in oversupply, since the LNG tankers are simply used as temporary floating storage “waiting for consumers to need gas and for prices to be more attractive,” Demoury said.

Japan’s finance ministry said Monday it spent $43 billion in October to bolster the value of the yen, which has tumbled against the dollar this year to lows not seen since the 1990s.

The ministry said it spent 6.35 trillion yen ($43 billion) on forex intervention operations between September 29 and October 27, without giving details of when or how often they had taken place.

It follows a similar decision to sell dollars and buy yen in September that cost 2.8 trillion yen (nearly $20 billion at the time) and was announced by authorities soon after it happened.

But the government had until now refused to confirm speculation by traders and analysts of further intervention this month, causing rollercoaster fluctuations in the yen’s value.

The currency dropped beyond 151 per dollar earlier in October for the first time in 32 years, before rebounding sharply, then gradually falling again.

Around the time of Monday’s announcement, one dollar bought 148 yen — still dramatically weaker than February levels of around 115.

Behind the currency’s slide is the contrast between the monetary policies of the US and Japanese central banks.

While the US Federal Reserve is fighting inflation with aggressive rate hikes, the Bank of Japan has stuck to its longstanding monetary easing programme, designed to encourage sustainable growth.

BoJ governor Haruhiko Kuroda said on Friday there would be no change “any time soon” to the bank’s ultra-loose stance.

“Traders want to test the resolve of the Bank of Japan,” Carol Kong, economist and currency strategist at Commonwealth Bank of Australia, told AFP.

The Japanese government has “a huge amount to spend on intervention”, with more than $1 trillion left in its forex coffers after September’s action, she said.

But to keep costs down, “they have instead used a lot of verbal intervention to try to keep dollar yen on the weaker side”.

Kuroda and Finance Minister Shunichi Suzuki have repeatedly vowed tough action against rapid changes in forex rates.

As well as the impact of government interventions, the yen has also strengthened slightly in recent days because investors expect the Fed to soon temper its hawkish rate hikes, Kong said.

But as long as the Bank of Japan sticks to its guns, moves by the Japanese government to strengthen the yen can only have a limited effect, said Rakuten Securities chief strategist Masayuki Kubota in a recent commentary.

“Intervention can’t stop the yen’s depreciation, but if fundamentals — the gap between Japanese and US interest rates — change, the fall of the yen will stop,” he wrote.

Most markets rose Monday ahead of a crucial Federal Reserve policy meeting later in the week, with investors hoping for a less hawkish tilt in their plans for interest rates.

A sense of relief has settled on trading floors over the past week following a report that the US central bank could take its foot off the accelerator in its push to rein in decades-high inflation.

Adding to the positive mood has been an indication that others around the world are looking at slowing down, though the excitement was tempered Friday by record inflation readings in Europe and data showing prices remained elevated.

Asian dealers were given a strong lead from Wall Street, where all three main indexes ended more than two percent higher thanks to a rally in tech firms following a strong earnings report from Apple.

Tokyo, Seoul, Sydney, Singapore, Taipei, Mumbai, Bangkok and Wellington all piled on more than one percent, while Jakarta was also up.

London and Frankfurt were flat at the open while Paris dipped.

Hong Kong and Shanghai were hit by concerns about China’s growth outlook as the government continues its zero-Covid strategy of lockdowns, with restrictions imposed in towns and cities nationwide.

Data showing activity in the factory and services sectors contracted last month highlighted the impact the measures are having on the world’s number two economy.

The drops also come after China announced a tally of more than 2,500 new virus cases, the biggest outbreak in more than two months, fanning concerns of further painful shutdowns.

All eyes are on the Fed’s policy meeting, which ends Wednesday.

While it is widely expected to announce a fourth successive 75 basis point hike, traders will be poring over the post-meeting statement looking for a hint that officials are open to dialling back the pace of increases.

The gathering comes as other central banks have recently indicated they are willing to ease up, with Canada raising rates less than expected last week, while authorities in Australia and Europe have taken a more dovish view.

Concerns that rapidly rising borrowing costs will send economies into a recession have hammered markets globally this year.

“There has been a succession of central bank downshifts, adding to the ‘peak hawkishness’ theme running through macro markets,” said SPI Asset Management’s Stephen Innes. “And investors are entirely focused on these U-turns as peak rates get priced in. 

“So, people don’t want to miss the stock market rally wagon, especially if the Fed conveys a similar policy downshift this week, sending the rally into overdrive as pivot procrastinators will be forced to chase.”

The policy decision is followed Friday by the release of US jobs figures, which will give a fresh snapshot of the economy in light of rising prices and interest rates.

A better-than-expected earnings season has also provided support to global markets, easing concerns that tighter monetary policies would hammer firms’ bottom lines, though big-name tech giants have taken a blow.

National Australia Bank’s Rodrigo Catril said more than 70 percent of companies that had reported had beaten forecasts, though he added that while markets had risen over the past month, some traders remained cautious.

“Those with a positive inclination may look at October’s equity performance as a sign of a new uptrend while others would suggest we have not yet seen the worst given the lag effects from monetary policy and the prospect of still more tightening to come,” he said in a note.

– Key figures around 0820 GMT –

Tokyo – Nikkei 225: UP 1.8 percent at 27,587.46 (close)

Hong Kong – Hang Seng Index: DOWN 1.2 percent at 14,687.02 (close)

Shanghai – Composite: DOWN 0.8 percent at 2,893.48 (close)

London – FTSE 100: FLAT at 7,046.37

Euro/dollar: DOWN at $0.9928 from $0.9967 on Friday

Pound/dollar: DOWN at $1.1570 from $1.1618 

Dollar/yen: UP at 148.01 yen from 147.46 yen

Euro/pound: UP at 85.80 pence from 85.77 pence

West Texas Intermediate: DOWN 0.5 percent at $87.44 per barrel

Brent North Sea crude: DOWN 0.5 percent at $95.30 per barrel

New York – Dow: UP 2.6 percent at 32,861.80 (close)

A Chinese joint venture producing Jeep SUVs for Stellantis will file for bankruptcy, the European carmaker said Monday, after its chief executive complained earlier this month political tensions with the West were affecting the business environment.

Earlier this month Carlos Tavares had said the auto giant would consider ending production in China, questioning whether the stability of relations between Beijing and the world could be guaranteed.

Shareholders have given their approval for the joint venture to file for bankruptcy “in a loss-making context”, Stellantis said.

The carmaker had terminated the Jeep joint venture with local partner Guangzhou Automobile Group (GAC) in July, and is in talks with local partner Dongfeng about its Peugeot and Citroen brands.

The Jeep joint venture’s “assets were no longer sufficient to pay off all debts”, GAC said in a separate filing to the Hong Kong stock exchange on Monday, confirming that the venture would file for bankruptcy.

“Affected by factors including decline in product competitiveness, (the GAC-Stellantis venture’s) production and operations have gradually fallen into difficulties,” GAC said.

Unlike German rival Volkswagen, which sold three million cars in China last year, Stellantis has never broken through there.

The company aims for revenues of 20 billion euros ($19.6 billion) in China by 2030 with its 14 brands, but Tavares earlier this month complained of unequal treatment from Beijing.

“The red carpet is rolled out for Chinese manufacturers in Europe, and that’s not how we’re welcomed in China,” he told reporters at the Paris Motor Show.

Hong Kong is “back in business” and exploring whether to legalise crypto trading by retail investors, the city’s finance chief announced Monday, kicking off a week of conferences aimed at resuscitating the Chinese hub’s image.

In contrast to mainland China where crypto has been all but banned, Hong Kong is looking to relax regulations and claw back some of the business that has left.

Years of strict pandemic controls and a political crackdown have hammered the Asian finance hub’s economy and sparked an exodus of talent that authorities say they now want to reverse.

A fintech conference opened on Monday and will be followed on Wednesday by a finance summit attended by some of the world’s top bankers.

“Hong Kong is open and inclusive towards the global community of innovators engaging in virtual asset businesses,” finance secretary Paul Chan told delegates at the fintech conference.

“In a great many ways, we are telling the world that we are back in business,” he added, in a speech that had to be delivered remotely after he caught Covid last week during an overseas trip.

In a new policy statement the government said it would launch a consultation to explore how the retail segment “may be given a suitable degree of access”. It added that Hong Kong was willing to review “property rights for tokenised assets and the legality of smart contracts”.

Currently Hong Kong restricts exchanges to clients with portfolios of at least HK$8 million ($1 million). 

Expanding permission to retail investors would allow far more regular residents to invest in cryptocurrencies and virtual assets.But that carries its own risks. 

There has been a global push to regulate the crypto market and protect investors following wild swings and a string of high-profile collapses.

Critics say crypto is an ideal tool to generate investment bubbles, hide illicit wealth and enable scams.

China, once one of the world’s largest crypto markets, banned transactions of  digital currencies in 2021.

Singapore recently strengthened regulations around retail transactions after a number of crypto exchanges imploded, including in the city state. 

Meanwhile, Japan has recently relaxed some of its more conservative rules on listing tokens.

Given its position as a gateway for China to the international markets, Hong Kong was initially something of a crypto hub.

The city then introduced a voluntary licensing regime in 2018 for big exchanges but only two were approved for permits — BC Technology and HashKey.

One of the biggest exchanges that used to be in the city, FTX, moved to the Bahamas last year.

China’s factory activity shrank in October, official data showed Monday, after industries were hit by strict Covid lockdowns.

The Purchasing Managers’ Index (PMI) — a key gauge of manufacturing in the world’s second-biggest economy — came in at 49.2, down from September’s 50.1 and below the 50-point mark separating growth from contraction, according to data from the National Bureau of Statistics (NBS).

Sporadic Covid-19 lockdowns around China have dampened demand and business confidence.

The manufacturing PMI has been in contraction territory for six out of the past eight months, as sweeping Covid restrictions paralysed major industrial cities such as Shanghai, Shenzhen and Chengdu and a summer of searing heat hit production.

“In October, affected by the frequent appearance of domestic outbreaks, China’s purchasing managers’ index declined,” NBS senior statistician Zhao Qinghe said in a statement.

Zhao added that “the foundation for China’s economic recovery and development needs to be further consolidated”, noting both weakened demand and rising raw material prices.

While activity at larger businesses expanded in October, work at small and medium-sized enterprises contracted significantly, with Zhao saying “the pressure on production and operation at small and medium-sized enterprises has increased”.

The non-manufacturing PMI came in at 48.7 points in October, a sharp decline from 50.6 in September and “below a critical point”, Zhao said in the statement.

Zhao added that Covid outbreaks in October had hit the service industry especially hard, with activity in transport, accommodation and food and beverage businesses falling during a traditional peak period coinciding with week-long national holidays.

“We don’t expect the zero-Covid policy to be abandoned until 2024, which means virus disruptions will keep in-person services activity subdued,” Capital Economics analyst Zichun Huang said in a note on Monday.

“The deepening global downturn will continue to weigh on exporters. And officials are still struggling to put a floor underneath the property market,” Huang added.

Chinese leaders have set out an annual economic growth target of about 5.5 percent, but many observers think the country will struggle to hit the target, despite announcing a better-than-expected 3.9 percent expansion in the third quarter.

And officials have shown no sign that they intend to ease the country’s zero-Covid strategy, with President Xi Jinping last week promoting Li Qiang, who oversaw a debilitating two-month lockdown in Shanghai, to the second-most powerful post in the Communist Party. 

The economic slowdown has also been exacerbated by a crisis in the massive property sector, where a series of debt-laden developers have defaulted on loans.

Most markets rose Monday ahead of a crucial Federal Reserve policy meeting later in the week, with investors hoping for a less hawkish tilt in their plans for interest rates.

A sense of relief has settled on trading floors over the past week following a report that the US central bank could take its foot off the accelerator in its push to rein in decades-high inflation.

Adding to the positive mood has been an indication that others around the world are looking at slowing down, though the excitement was tempered Friday by record inflation readings in Europe and data showing prices remained elevated.

Asian dealers were given a strong lead from Wall Street, where all three main indexes ended more than two percent higher thanks to a rally in tech firms following a strong earnings report from Apple.

Tokyo, Hong Kong, Seoul, Singapore, Taipei and Wellington all piled on more than one percent, while Sydney and Jakarta were also up.

However, Shanghai fell on concerns about China’s growth outlook as the government presses on with its zero-Covid strategy of lockdowns, with restrictions imposed in towns and cities nationwide.

Data showing activity in the factory and services sectors contracted last month highlighted the impact the measures are having on the world’s number two economy.

All eyes are on the Fed’s policy meeting, which ends Wednesday.

While it is widely expected to announce a fourth successive 75 basis point hike, traders will be poring over the post-meeting statement looking for a hint officials are open to dialling back the pace of increases.

The gathering comes as other central banks have recently indicated they are willing to ease up, with Canada raising rates less than expected last week, while authorities in Australia and Europe have taken a more dovish view.

Concerns that rapidly rising borrowing costs will send economies into a recession has hammered markets globally this year.

“There has been a succession of central bank downshifts, adding to the ‘peak hawkishness’ theme running through macro markets,” said SPI Asset Management’s Stephen Innes. “And investors are entirely focused on these U-turns as peak rates get priced in. 

“So, people don’t want to miss the stock market rally wagon, especially if the Fed conveys a similar policy downshift this week, sending the rally into overdrive as pivot procrastinators will be forced to chase.”

A better-than-expected earnings season has also provided support to global markets, easing concerns that tighter monetary policies would hammer firms’ bottom lines, though big-name tech giants have taken a blow.

National Australia Bank’s Rodrigo Catril said more than 70 percent of companies that had reported had beaten forecasts, though he added that while markets had risen over the past month, some traders remained cautious.

“Those with a positive inclination may look at October’s equity performance as a sign of a new uptrend while others would suggest we have not yet seen the worst given the lag effects from monetary policy and the prospect of still more tightening to come,” he said in a note.

– Key figures around 0230 GMT –

Tokyo – Nikkei 225: UP 1.6 percent at 27,529.33 (break)

Hong Kong – Hang Seng Index: UP 0.7 percent at 14,959.04

Shanghai – Composite: DOWN 0.8 percent at 2,891.75

Euro/dollar: DOWN at $0.9953 from $0.9967 on Friday

Pound/dollar: DOWN at $1.1601 from $1.1618 

Dollar/yen: UP at 148.00 yen from 147.46 yen

Euro/pound: UP at 85.83 pence from 85.77 pence

West Texas Intermediate: DOWN 0.6 percent at $87.36 per barrel

Brent North Sea crude: DOWN 0.9 percent at $94.87 per barrel

New York – Dow: UP 2.6 percent at 32,861.80 (close)

London – FTSE 100: DOWN 0.4 percent at 7,047.67 (close) 

Hundreds of top bankers will arrive in Hong Kong this week to hear the government’s sales pitch that — despite lingering pandemic curbs and entrenched US-China tensions — the city is once again open for business.

The Chinese finance hub has prepared a high-profile summit, including a glitzy banquet at a newly opened art museum to woo financial bigwigs, hoping to outshine regional rivals like Singapore, London and Tokyo.

Wednesday’s gathering has come under fire from some United States lawmakers, who said Wall Street’s luminaries are “whitewashing human rights violations” with their presence and giving political cover to city leader John Lee.

Lee, who is scheduled to deliver an opening keynote speech, is among Chinese officials sanctioned by Washington for their role in cracking down on human rights in Hong Kong. 

He is, as a result, unable to hold a bank account at the financial giants whose top executives will share the stage with him this week.

“Business as usual in Hong Kong is the wrong choice for these companies,” said the leaders of the bipartisan US Congressional-Executive Commission on China.

The event still has plenty of cheerleaders from local industry, anxious to maintain Hong Kong’s standing as a global finance hub.

“We need to… paint a more positive picture about the real situation,” financial services sector lawmaker Robert Lee told AFP.

“Hong Kong is open for business. I think that message should be loud and clear.”

– Restrictions remain –

Since Lee’s administration took office in July, officials have billed the summit as a watershed moment to show that the city has left behind China’s strict zero-Covid strategy.

Hong Kong finally scrapped mandatory hotel quarantine in September. Many controls, however, remain in place — curbs that rival cities have long abandoned.

Overseas arrivals must undergo frequent testing and are unable to go to bars and restaurants for their first three days in the city.

Restrictions on various gatherings remain and masks are compulsory, including outdoors.

The finance summit is being held at the Four Seasons hotel and partial exemptions have been granted so bankers can “have meals with others in private rooms” and visit venues that would otherwise be off-limits.

Those who test positive will be permitted to skip isolation and leave by private flights if they can.

“Covid restrictions are hurting us,” said Mike Rowse, a former civil servant who promoted the city to foreign investors.

“I used to travel around the world selling Hong Kong… When you finish (that pitch) you say: ‘Come and see for yourself’. But right now you can’t say that.”

The delicate balance between convenience and pandemic control was thrown into sharp relief last week, when Hong Kong finance chief Paul Chan caught the coronavirus while abroad — potentially forcing him to skip the conference.

Citigroup CEO Jane Fraser also contracted the virus and pulled out of the event, removing one of the few senior women at a gathering otherwise dominated by men. 

Top officials have promised to keep reopening. 

But Aries Wong, an economist at Hong Kong Baptist University, said the incremental tweaks mean little to foreign firms unless controls are fully scrapped.

“There is still policy uncertainty because if the controls remain on the books, it means they can potentially be tightened if things worsen again,” Wong told AFP.

– Gateway to China –

International firms are also caught in the middle of fraying US-China trade ties and competing sanction regimes that make compliance a headache.

The former British colony has been under Beijing’s tightening grip after authorities cracked down on huge and often violent pro-democracy protests in 2019.

“China’s government has suggested that Hong Kong’s distinct status as a global economic connector remains firmly intact,” said Austin Strange, an international relations scholar at the University of Hong Kong.

“The international community is less settled on this issue, and will look to actual policies and measures… rather than take official statements at face value.”

The issue of US sanctions arose again earlier this month when Lee’s government made clear it would not follow US, European and British sanctions against Russia over Moscow’s invasion of Ukraine.

While Hong Kong’s closeness to China may be a geopolitical liability, it is also the very heart of the city’s appeal to the many banks present at the summit.

Hong Kong remains China’s prime gateway to international markets and foreign capital.

Laurence Li, the head of Hong Kong’s financial industry advisory body, said China is pushing ahead with measures to more seamlessly connect Hong Kong markets to the mainland.

“No one in the world can afford not to interact with China… Hong Kong remains the best place to participate in the mainland’s economy and growth,” Li told AFP.