US Business

The International Energy Agency said Thursday it believes global energy emissions will peak in 2025 as surging prices due to the Russian invasion of Ukraine propel investment in renewables.

Only last year the IEA said there was “no clear peak in sight” in energy emissions, but the new higher investment in wind and solar is setting up demand for all fossil fuels to peak or plateau, leading to a drop in emissions.

“The global energy crisis triggered by Russia’s invasion of Ukraine is causing profound and long-lasting changes that have the potential to hasten the transition to a more sustainable and secure energy system,” the IEA said as it released its latest annual World Energy Outlook report.

Based on the latest measures and policies announced by governments in the face of soaring energy prices, the IEA forecasts global clean energy investment to rise by more than 50 percent from today’s levels to $2 trillion per year by 2030. 

Those measures will propel sustained gains in renewables and nuclear power.

“As a result, a high point for global emissions is reached in 2025,” the IEA said.

Global energy-related CO2 emissions are then set to fall back slowly from a high point of 37 billion tonnes per year to 32 billion tonnes by 2050, it added.

The Paris-based organisation, which advises energy-consuming nations, said that its forecast sees demand for all types of fossil fuels peaking or hitting a plateau.

Coal use, which has seen a temporary bump higher, will drop back in the next few years as more renewables come online.

Natural gas hits a plateau at the end of the decade, instead of the previous forecast of a steady rise.

Oil demand levels off in the mid-2030s and then gradually declines towards mid-century due to uptake of electric vehicles, instead of the earlier estimate of a steady increase.

Overall, the share of fossil fuels in the global energy mix in the IEA’s stated policies scenario falls from around 80 percent to just above 60 percent by 2050.

– Energy markets ‘changed’ –

“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” said IEA Executive Director Fatih Birol in a statement as the report was released.

But that will still leave the world on track for a rise in global temperatures of around 2.5 degrees Celsius by the end of the century, which would likely trigger severe climate change impacts.

The IEA also has a scenario to arrive at zero net emissions in 2050, which is seen as necessary to hit the 1.5C warming target enshrined in the Paris climate pact.

That would require clean energy investments to rise to $4 trillion per year by 2030, instead of the current forecast of $2 trillion.

“The IEA, with all its expertise and authority is clear: clean energy investments must triple by 2030, and gas is a dead end,” said Laurence Tubiana, head of the European Climate Foundation and France’s former climate ambassador.

“The current European energy crisis clearly proves the dangers of gas: high price, volatility, geopolitical dependence,” she added.

“We are approaching to the end of the golden age of gas,” the IEA’s Birol said at a later news conference.

The IEA’s analyses show “that we are seeing a turning point in the history of energy and this crisis indeed accelerates clean energy transitions,” he added.

However Birol noted that energy security, not climate change, is “the biggest driver for renewable” energy development currently.

Another motivation is that governments want to ensure they have got in on the manufacturing of new renewable energy technologies.

“The three drivers, when they come together, is the reason I am optimistic we are going to see an acceleration of clean energy technologies,” Birol said.

– Russia takes $1tn hit –

The IEA’s analyses also concluded that this energy crisis has also harmed Russia’s long-term economic outlook. 

By reducing natural gas supplies to European nations it has not only pushed them to accelerate their transition to renewables, but reduced the attractivity of gas in security terms while making it expensive for developing markets.

“Russia’s role in the international energy affairs will be diminished, much diminished in terms of oil and gas trade,” said Birol.

“As a result of the decline in oil and gas sales between now and 2030, Russia will lose about $1 trillion in export revenues” according to IEA calculations, he added.

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The euro held above parity with the dollar Thursday but eurozone stocks dropped as the European Central Bank prepares to announce another big hike to interest rates in the face of sky-high inflation.

The euro on Wednesday traded above one dollar for the first time since last month as the US currency slid also against the pound and yen on data showing cracks in the world’s biggest economy.

The dollar recovered some of the lost ground, however, ahead of Thursday’s key ECB decision.

“The European Central Bank will once again have to turn a blind eye on yet more recessionary signals in the eurozone, China and elsewhere as it battles to bring inflation back under control,” noted City Index market analyst Fawad Razaqzada.

“A 75-basis point rate hike appears to be a foregone conclusion, which means the reaction of the euro and European stocks will depend on more than just the rate decision itself.”

Markets will be looking for clues on the size of future ECB rate hikes in the press conference from the bank’s head Christine Lagarde, analysts said.

After a painful year for markets hit by central bank rate hikes to fight decades-high inflation, investors have taken heart from several weak US indicators — the latest on the services and real estate sectors — suggesting the economy is slowing.

That has led to speculation officials could be ready to tap the brakes on the increases, while some Fed policymakers have also raised the possibility of a slowdown.

The optimism was boosted Wednesday by news that the Bank of Canada had raised rates less than expected and signalled it is ready to wind down.

“The downshift at the Bank of Canada has further fanned the winds of a similar move by the Fed come December and comes after the (Australian central bank) slowed the pace of hikes to 25 basis points at its October meeting,” said National Australia Bank’s Taylor Nugent.

– Credit Suisse shares slide –

Traders continued to digest earnings updates from the world’s biggest companies.

Shares in Credit Suisse slumped nearly 11 percent after Switzerland’s second-biggest bank announced a string of radical measures Thursday aimed at turning around the beleaguered lender.

Credit Suisse revealed huge third quarter losses and said it would revamp its investment banking unit, slashing 9,000 jobs and raising fresh capital.

London’s benchmark FTSE 100 stocks index climbed, boosted by strong share-price gains for energy heavyweights BP and Shell following the latter’s bumper third-quarter profits on high oil and gas prices.

– Key figures around 1100 GMT –

Euro/dollar: DOWN at $1.0032 from $1.0087 on Wednesday

Pound/dollar: DOWN at $1.1562 from $1.1621 

Dollar/yen: DOWN at 146.32 yen from 146.39 yen

Euro/pound: DOWN at 86.74 pence from 86.77 pence

London – FTSE 100: UP 0.3 percent at 7,076.41 points

Frankfurt – DAX: DOWN 0.8 percent at 13,093.42

Paris – CAC 40: DOWN 0.8 percent at 6,229.06

EURO STOXX 50: DOWN 0.7 percent at 3,579.38

Tokyo – Nikkei 225: DOWN 0.3 percent at 27,345.24 (close)

Hong Kong – Hang Seng Index: UP 0.7 percent at 15,427.94 (close)

Shanghai – Composite: DOWN 0.6 percent at 2,982.90 (close)

New York – Dow: FLAT at 31,839.11 (close)

Brent North Sea crude: UP 0.6 percent at $96.24 per barrel

West Texas Intermediate: UP 0.6 percent at $88.41 per barrel

The once-disgraced heir to the sprawling Samsung empire was on Thursday named top executive of its most important business, two months after South Korea’s president pardoned him for embezzlement and corruption convictions.

The board of Samsung Electronics, one of the world’s biggest smartphone and chipmakers, confirmed Lee Jae-yong’s formal ascent — though he had already been de facto leader since his father’s heart attack in 2014.

Critics have said Lee taking the reins so soon after his year and a half in jail is yet another example in South Korea’s history of convicted business leaders getting off the hook on economic grounds.

The Samsung Electronics board promoted Lee to executive chairman to give the company “stronger accountability and business stability” due to the “current uncertain global business environment”, the company said in a statement Thursday.

Samsung is the most powerful of South Korea’s “chaebols”, family-controlled empires that dominate business, and it contributes an estimated fifth of the country’s GDP.

Lee was imprisoned after convictions for fraud and embezzlement following a sweeping investigation that also brought down President Park Geun-hye in 2017.

After serving 18 months, just over half of his original sentence, Lee was released on parole in August 2021.

He immediately returned to work at Samsung. 

In May, Lee was excused from a hearing in a separate fraud trial so he could host US President Joe Biden at a Samsung chip plant in South Korea.

Lee — who has a net worth of $7.2 billion, according to Forbes — received a presidential pardon in August 2022 with the expectation that he would “contribute to overcoming the economic crisis” in South Korea, the government said.

But critics slammed Lee’s elevation to chairman, with local civic group Solidarity for Economic Reform calling it “flawed on many fronts”. 

“It is a far cry from responsible management for him to be named Samsung Electronics’ chairman when his illegal acts brought considerable damage to the company even though he was pardoned by the president,” the group said in a statement.

– Legal woes not over –

Lee’s father Lee Kun-hee, who suffered a heart attack in 2014 and was bedridden until his death at age 78 in 2020, was credited with turning Samsung into a global tech giant.

He held the position of chairman until his death, and the post had been left vacant until the younger Lee’s promotion Thursday.

By taking his father’s old title, Lee sends a clear message that he will be “fully responsible” for Samsung’s management decisions, said Kim Dae-jong, professor of business at Sejong University in Seoul.

Samsung is trying to show its leadership is accountable, as part of a drive “to gain an upper hand in the global memory chip competition”, he told AFP.

The elder Lee was convicted twice, once in 1996 of bribing former president Roh Tae-woo, and then for embezzlement and tax evasion in a slush fund scandal in 2008.

But suspended sentences meant he never served time in jail, and he received two presidential pardons.

The elder Lee went on to spearhead his country’s successful efforts to secure the 2018 Winter Olympics.

On Thursday, Lee Jae-yong told Samsung Electronics employees he believed the company would not just survive the current global economic turmoil but emerge stronger.

“There has never been a time when we didn’t face a crisis. But depending on how we respond to it, we can turn it into an opportunity,” Lee said in a post on an internal bulletin board.

His legal woes are not over: he also faces a separate trial over accusations of accounting fraud in the 2015 merger of two Samsung firms.

Swedish automaker Volvo Cars on Thursday rising raw material costs and inflation drove down profits in the third quarter.

The group posted a net profit of 665 million kronor ($61 million) in the July-September period, a drop of 71 percent compared to 2.3 billion kronor during the same quarter a year ago.

The figure was far below analysts’ forecasts of between 2.15 and 2.19 billion kronor, according to Bloomberg and Factset. 

The company’s share price was down by around seven percent in midday trading on the Stockholm stock exchange. 

Chief executive Jim Rowan said the company was hit hard by rising raw material prices, record inflation, higher interest rates and the war in Ukraine.

“The macroeconomic uncertainties around the world weighed on our third quarter performance”, he said in a statement.

Revenue meanwhile rolled in slightly higher than analysts’ expectations, rising by 30 percent to 79.3 billion kronor, boosted by “robust” demand for the company’s SUVs. 

Analysts had predicted third quarter sales of between 78.1 and 78.7 billion kronor.

Retail sales declined however in some markets, including its main markets Europe and the United States, where the number of vehicles sold fell by 14 and 32 percent respectively.

The carmaker insisted however that its order book remained solid.

Volvo Cars, which aims to have an all-electric fleet by 2030, also reported “sharp pick-up” for its fully-electric vehicles at the end of the quarter, especially in September.

It said sales of fully-electric cars soared by 87 percent in the third quarter, accounting for seven percent of its total sales during the period. 

The company, a subsidiary of Chinese group Geely, said manufacturing output continued to improve in the third quarter, but “unforeseen factors” such as power outages and Covid-19 related lockdowns in China “slowed down the pace of normalisation”.

It expected production, wholesale and retail growth in the second half of the year.

“For the full year 2022, we expect slightly lower wholesale volumes than 2021, assuming no further major supply chain disturbances. Wholesale and retail volumes will be on similar levels”, it said.

The world’s top brewer AB InBev said Thursday that it enjoyed its best quarter of the year as sales volumes rose, triggering a jump in profits.

While surging inflation has been putting pressure on consumers everywhere, the maker of Budweiser and Corona beers still managed to boost its sales volumes in the July-September quarter.

The 3.7-percent volume growth compared to the same period last year helped drive a 12.1-percent increase in sales revenue to $15.09 billion. 

The company called it the “best quarterly volume performance this year”.

Net profit soared 62 percent to $1.63 billion.

“We continue to see strong consumer demand for our portfolio and a resilient beer category as we navigate the dynamic operating environment,” chief executive Michel Doukeris said in a statement.

The Belgium-headquartered company, which also makes Beck’s and Stella Artois, boosted the lower end of its annual earnings outlook.

It now expects 2022 operating profits “to grow between 6-8 percent”.

Sales revenue should grow at a faster rate “from a healthy combination of volume and price” increases, it added.

Danske Bank, which is under investigation by Danish and US authorities, said Thursday it had set aside an additional 14 billion kroner (1.9 billion euros) to cover expected fines related to massive suspected money laundering via its Estonian branch.

“The discussions with US and Danish authorities related to the Estonia matter are now at a stage where Danske Bank can reliably estimate the total financial impact of a potential coordinated resolution amounting to a total of DKK 15.5 billion” or $2.1 billion, the bank’s chief executive Carsten Egeriis said in a statement.

“Our dialogue with the authorities is ongoing, and while there is still uncertainty that a resolution will be reached, we hope that a resolution will be concluded before the end of this year,” he added.

The bank had already set aside 1.5 billion kroner in 2018 when the scandal first emerged.

An investigation carried out by an outside law firm for the bank found that it could not account for the origin of more than $220 billion that flowed through its Estonian branch from 2007 to 2015, much of which was suspected to have come from Russia.

Danske Bank’s shares soared more than 10 percent after the announcement, the first time it has provided any estimate of the fines it may face. 

EU chief Charles Michel called on Thursday for closer ties with Central Asia on his first official visit to Kazakhstan, the main economic powerhouse in a region where Russia’s influence has come under question.

“Central Asia and Europe are coming closer together and becoming more and more connected,” Michel said at a press conference with Kazakh President Kassym-Jomart Tokayev in the capital Astana.

The head of the EU Council said Kazakhstan was a “crucial partner” and the EU hoped to “develop our cooperation”.

Michel’s visit comes eight months into Russia’s invasion of Ukraine, which has made Moscow’s former Soviet neighbours nervous and intensified the Kremlin’s clash with the West.

“My visit takes place at a difficult time for Europe and the wider region,” Michel said, condemning Moscow’s “war of aggression”. 

He is due to meet the leaders of all five Central Asian countries — Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan — at 4:00 pm (1000 GMT). 

This is the first EU-Central Asia summit, a gathering Michel described as “much more than just a policy dialogue between two regions”.

“It’s a powerful symbol of our reinforced cooperation,” he said. 

He singled out Kazakhstan as a major trading partner for the EU and called for investment in transport infrastructure in the country, which has looked to reduce its dependence on Moscow since the latter sent troops to Ukraine. 

Michel’s visit comes two weeks after Astana hosted several summits attended by Russia — as well as by China and Turkey, who are also seeking to strengthen their influence in the region. 

Central Asian countries, traditional allies of Moscow, have trod a fine line on the Kremlin’s attack on Ukraine, neither condemning nor openly supporting it.

Tokayev even clashed with Russian President Vladimir Putin publicly in June, refusing to recognise the self-declared separatist republics controlled by pro-Moscow rebels in eastern Ukraine. 

Russia has since claimed to have annexed the regions.

Meanwhile Astana is seeking new routes for its oil exports, around three quarters of which transit Russia.

In early July, Tokayev pledged greater energy cooperation with the EU.

In a joint statement on Thursday, Tokayev and Michel said they discussed how to avoid “unintended negative impact on Kazakhstan’s economy” of EU sanctions against Russia, imposed over the Ukraine conflict.

They also discussed relocating to Kazakhstan “European manufacturing companies”, whose products are not subject to sanctions.

Rich in hydrocarbons and minerals, Kazakhstan lies at the heart of China’s massive new silk road project. 

Like Beijing, Turkey is also advancing its interest in the region, highlighting its ethno-linguistic and religious ties to Central Asia. 

The European Central Bank is expected to roll out another super-size rate hike Thursday to combat runaway inflation, despite concerns higher borrowing costs could deepen the pain of a looming recession.

The ECB’s 25-member governing council is likely to lift key interest rates by 75 basis points for the second consecutive time, economists say.

The Frankfurt institution is under pressure to rein in record-high inflation, driven by surging food and especially energy prices in the wake of Russia’s war in Ukraine.

Eurozone inflation stood at just under 10 percent in September, nearly five times the ECB’s two-percent target.

ECB president Christine Lagarde warned recently that inflation was “far too high” and more action was required to prevent price shocks from becoming “entrenched”.

Like other central banks, the ECB is fighting back with a series of rate hikes intended to dampen demand by making credit more expensive for households and businesses — at the risk of triggering an economic downturn.

“The 75 basis point rate hike looks like a done deal,” said ING economist Carsten Brzeski, adding that the ECB “has turned a blind eye on recession risks”.

– Political pushback –

The outlook for the eurozone economy has darkened in recent weeks as the 19-nation region grapples with the fallout from the Ukraine war, soaring tensions with Moscow and pandemic-induced global supply chain woes.

If Russia completely cuts off gas flows to Europe, the eurozone economy could shrink by nearly one percent in 2023, ECB vice-president Luis de Guindos has warned.

That scenario has become more likely after Russia in late August shut down the crucial Nord Stream 1 pipeline to Europe’s economic powerhouse Germany.

The German economy is already forecast to shrink by 0.4 percent next year.

As European governments race to unveil multi-billion-euro support measures to help citizens through a cost-of-living crisis this winter, the ECB’s monetary policy tightening has come under scrutiny.

Italian Prime Minister Giorgia Meloni this week slammed the ECB’s “rash choice” to keep hiking rates, saying it created “further difficulties for member states that have elevated public debt”, Bloomberg News reported.

French President Emmanuel Macron has expressed “concern” that the ECB was “shattering demand” in Europe.

Lagarde has urged governments not to fall into the trap of spending so much that they end up boosting inflation and working against the ECB.

The ECB has already increased rates twice since July, ending over a decade of ultra-low and even negative interest rates.

The recently weak euro jumped back above parity with the US dollar ahead of Thursday’s ECB meeting, as traders grew hopeful that the Federal Reserve may tap the brakes on its aggressive rate increases amid signs of a slowing US economy.

A stronger euro helps keep the lid on consumer prices because it makes imports cheaper.

– Balance sheet in focus –

The ECB is also expected to use this week’s meeting to discuss bringing other monetary policy levers in line with its inflation-busting efforts.

Policymakers are likely to announce changes to the 2.1 trillion euros (dollars) in super cheap, long-term loans (TLTROs) offered to banks in recent years to help the eurozone through several crises.

As a consequence of the rate hikes, lenders can now make an easy profit by parking their excess TLTRO cash at the ECB and pocketing the new, higher deposit rate — prompting policymakers to look for ways to incentivise early repayment of the loans.

The ECB may also ponder how best to shrink the five-trillion-euros worth of bonds on its balance sheet, after years of hoovering up government and corporate debt to drive up stubbornly low inflation.

But given the uncertain outlook and the risk of rattling financial markets, analysts say the start of any “quantitative tightening” — letting the bonds mature or actively selling them — is some way off.