US Business

The “enormous scale” of Chinese lending to developing nations makes it critical Beijing do more to participate in restructurings to avoid a new international debt crisis, a senior US Treasury official said Tuesday.

In the wake of the pandemic, many countries are facing debt distress, and China has delayed or failed to participate in multinational efforts to try to work out those borrowing loads, said Brent Neiman, counselor to the Treasury Secretary.

“China’s enormous scale as a lender means its participation is essential,” Neiman said in a speech to the Peterson Institute for International Economics.

He noted that estimates of the total of outstanding Chinese official loans, while uncertain due to a lack of transparency, range widely to as much as $1 trillion.

“China became the world’s largest official creditor in 2017, surpassing the claims of the World Bank, IMF, and all Paris Club official creditors combined,” he said.

The high borrowing, outflow of funds from developing nations and strong US dollar amid rising interest rates have increased the pain for debtor countries, and “these ingredients all but assure debt distress in a number of countries,” he said.

“Failure to act on these debts could imply years of ongoing difficulties with the servicing of debts and with underinvestment and lower growth in low and middle income countries.”

In a now familiar message, repeated by government officials as well as the International Monetary Fund and World Bank, Neiman called on China to end the “enormous delays” in participating in the international efforts to provide relief.

The G20 has agreed on a “common framework” for debt restructuring for the poorest countries, but to date only three have qualified, and only one, Zambia, has received assurances from China of debt restructuring, allowing it to secure an IMF aid package.

Neiman warned the delays “may discourage others from requesting needed treatments, and preclude the best outcomes.”

Middle income countries have fared no better in debt workouts with Chinese creditors, he said, and crisis-hit countries like Sri Lanka are not eligible for the common framework.

He called on Beijing to take steps to speed the workouts, including setting up a single entity to deal with bad loans, and providing more transparency on the terms and lending amounts.

Twitter’s lawyers will question Elon Musk next week as they gather evidence in a legal battle to hold him to his $44 billion buyout deal, a Tuesday court filing said.

The Tesla chief will be deposed under oath for two days and maybe even a third if needed, in sessions that are to be recorded by “stenographic, sound and visual means,” according to the filing.

Musk’s deposition is set to take place privately in law offices, and comes as part of an evidence gathering phase ahead of a five-day trial scheduled to begin October 17 in the Court of Chancery in the state of Delaware.

The long list of those being asked for documents or to answer questions in the case includes Twitter co-founder and former chief Jack Dorsey, who was to be deposed Tuesday by Musk’s lawyers.

Musk, the world’s richest man, said in a letter in April that he was canceling the deal because he was misled by Twitter concerning the number of bot accounts on its platform, allegations rejected by the company.

He later added accusations made in a whistleblower complaint made by a former head of security at Twitter to his reasons for walking away from the deal.

Twitter has stood by its assessment of user numbers, and portrayed the whistleblower as a “disgruntled former employee” whose allegations are without merit.

German gas company Uniper said Tuesday it was on the brink of being nationalised as Berlin stepped in to prop up the energy sector amid a crisis triggered by the Russian invasion of Ukraine.

Uniper was in “final discussions” over a deal with the German government and its majority shareholder, the Finnish state-owned energy company Fortum, it said in a statement.

Under the plan being discussed, the German government would “acquire the Uniper shares currently held by Fortum” and “obtain a significant majority stake in Uniper”, the company said.

The German government would also inject eight billion euros ($8 billion) in cash to prop up the struggling energy company, Uniper said.

“The final agreement has not yet been concluded,” it added.

One of the biggest importers of Russian gas, Uniper has been squeezed as Moscow has reduced supplies to the continent in the wake of its invasion of Ukraine in February.

Missing deliveries have had to be replaced with expensive supplies from the open market, where prices for gas have skyrocketed.

The German state had already agreed in July to take a 30 percent stake in Uniper as part of an initial bailout agreement.

But Uniper announced earlier this month that the two sides were exploring a possible nationalisation as the energy crisis showed no signs of abating.

– Trading stop –

Majority shareholder Fortum separately confirmed that discussions over the bailout deal were in their “final stages” and that it was set to be reimbursed for the support it extended to Uniper earlier this year.

Fortum provided an eight-billion-euro loan to Uniper in January as the price of gas had already begun to climb amid tensions with Moscow before the invasion of Ukraine.

The Finnish company held a near-80-percent stake in Uniper, which would have been cut to around 56 percent under the July bailout plan.

The Helsinki stock exchange earlier on Tuesday announced a halt to trading of shares in Fortum amid the talk of an imminent deal on the nationalisation of Uniper.

Shares in Fortum were up 9.5 percent to 12.10 euros before the suspension, while Uniper rose 3.8 percent to 4.18 euros on the Frankfurt Stock Exchange at the close of trading.

The Finnish minister responsible for state companies said the Nordic country would “not accept nationalisation without compensation.”

“We think it is important that Fortum gets back the eight billion it paid to Uniper and, in general, that Finnish taxpayers do not incur any undue costs in resolving this crisis,” minister Tytti Tuppurainen said in Brussels on Tuesday.

– Energy dependence –

Earlier in September, the German government entered into discussions with another gas supplier, VNG, over a possible bailout package.

Russia’s war in Ukraine has triggered an earthquake on European energy markets, cranked up the pressure on suppliers and raised fears of possible shortages over the winter.

Germany has found itself particularly exposed due to its previous heavy reliance on Russian energy imports.

Since the outbreak of the war, Berlin has worked to wean itself off Russian gas and secure alternative supplies.

Officials have seized key pieces of energy infrastructure which were in the hands of Russian energy companies and mandated gas stores to be filled.

Germany has also taken the radical step of restarting mothballed coal power plants and granting an extension to nuclear facilities, which were due to go offline at the end of the year under a long-planned energy transition.

Any nationalisation could further call into question plans for a gas surcharge to be imposed on consumers, of which Uniper was set to be one of the main beneficiaries.

The levy, set to come into force on October 1, was designed to support the energy market by allowing struggling companies to pass on rising costs.

But it has sparked outrage when it emerged that even highly profitable energy companies with little exposure to gas have applied to receive the levy.

Stocks retreated Tuesday as Sweden’s jumbo interest rate hike, aimed at tackling inflation, stoked expectations of more increases this week from the US Federal Reserve and the Bank of England.

The Swedish central bank sprang its biggest rise in three decades, ramping up its policy rate by a full percentage point to 1.75 percent.

The news sent the region’s markets into reverse as tighter global borrowing costs bear down on economic activity.

Frankfurt equities ended the day down 1.0 percent as news of rocketing German producer prices further fanned inflation fears, and the government appeared close to nationalising the energy company Uniper, which has been brought low by the spike in gas prices.

London fell after reopening following the funeral of Queen Elizabeth II on Monday.

The US dollar rose against rivals as the Fed’s almost certain interest rate hike approached, while oil prices slid.

Wall Street’s main stocks indices fell, with the Dow down 1.1 percent in late morning trading.

– ‘Nerves jangling again’ –

“European stocks rallied at the open — but a jumbo rate hike from Sweden’s central bank sent the nerves jangling again as investors worry about what’s in store from global central banks,” Markets.com analyst Neil Wilson told AFP.

The Fed’s decision has been the main focus for the markets after figures last week showed consumer prices are still rising at a pace not seen since the early 1980s.

With Fed officials vowing to hike rates sufficiently to bring inflation down, expectations were strengthened that it will raise its key interest rate by another 0.75 percentage points on Wednesday.

Some observers now speculate over a possible one-percentage-point move.

On Thursday, the Bank of England (BoE) is predicted to deliver another sizeable increase in British borrowing costs.

“The (Swedish) hike underlined just how serious central banks are taking the inflation threat and with 75 basis point hikes from the Bank of England and Federal Reserve looking like slam-dunk certainties, the early optimism in the markets quickly evaporated,” added Wilson.

“The reality of central bank tightening… is keeping a lid on stocks and will continue to act as a headwind for risk.”

Sentiment on Wall Street was also dampened by data showing a drop in housing construction permits, although housing starts increased 12.2 percent month-on-month in August.

“The key takeaway from the report is that the weakness in the permits data suggests the strength in starts is not sustainable, especially when also taking into account that mortgage rates have risen since the July-August period,” said analyst Patrick O’Hare at Briefing.com.

Asian markets meanwhile enjoyed a much-needed bounce Tuesday, tracking Wall Street’s late Monday rally.

Elsewhere on Tuesday, the British pound remained under pressure, even as the BoE lines up another rate hike, after sliding on Friday to a 1985 low at $1.1351.

Oil prices continued their march lower.

“A strong US dollar, rising yields and concerns over demand as the global economy slows is weighing on crude oil prices again,” said market analyst Michael Hewson at CMC Markets.

– Key figures at around 1530 GMT –

New York – Dow: DOWN 1.1 percent at 30,690.39 points

EURO STOXX 50: DOWN 0.9 percent at 3,467.09

London – FTSE 100: DOWN 0.6 percent at 7,192.66 (close)

Frankfurt – DAX: DOWN 1.0 percent at 12,670.83 (close)

Paris – CAC 40: DOWN 1.4 percent at 5,979.47 (close)

Tokyo – Nikkei 225: UP 0.4 percent at 27,688.42 (close)

Hong Kong – Hang Seng Index: UP 1.2 percent at 18,781.42 (close)

Shanghai – Composite: UP 0.2 percent at 3,122.41 (close)

Euro/dollar: DOWN at $0.9987 from $1.0024 on Monday

Dollar/yen: UP at 143.74 yen from 143.21 yen

Pound/dollar: DOWN at $1.1415 from $1.1431

Euro/pound: DOWN at 87.57 pence from 87.70 pence 

Brent North Sea crude: DOWN 1.4 percent at $90.74 per barrel

West Texas Intermediate: DOWN 1.6 percent at $84.04 per barrel

burs-rl/kjm

Stocks retreated Tuesday as Sweden’s jumbo interest rate hike, aimed at tackling inflation, stoked expectations of more increases this week from the US Federal Reserve and the Bank of England.

The Swedish central bank sprang the biggest rise in three decades, ramping up its rate by a full percentage point to 1.75 percent.

The news sent the region’s markets into reverse as tighter global borrowing costs bear down on economic activity.

Frankfurt equities dropped about 0.8 percent as news of rocketing German producer prices further fanned inflation fears.

London fell after reopening following the funeral of Queen Elizabeth II on Monday.

The euro dipped against main rivals after Monday’s surge, while oil prices slid on the stronger dollar.

Wall Street’s main stocks indices all fell by 0.8 percent as trading got underway.

– ‘Nerves jangling again’ –

“European stocks rallied at the open — but a jumbo rate hike from Sweden’s central bank sent the nerves jangling again as investors worry about what’s in store from global central banks,” Markets.com analyst Neil Wilson told AFP.

The Fed’s decision is the main markets focus after figures last week showed consumer prices are still rising at a pace not seen since the early 1980s.

The US Federal Reserve is forecast Wednesday to hike its key interest rate by another 0.75 percentage points.

Some observers have even speculated over a possible one-percentage-point move.

One day later, the Bank of England (BoE) is predicted to deliver another sizeable increase in British borrowing costs.

“The (Swedish) hike underlined just how serious central banks are taking the inflation threat and with 75 basis point hikes from the Bank of England and Federal Reserve looking like slam-dunk certainties, the early optimism in the markets quickly evaporated,” added Wilson.

“The reality of central bank tightening… is keeping a lid on stocks and will continue to act as a headwind for risk.”

Sentiment on Wall Street was also dampened by data showing drop in housing construction permits, although housing starts increased 12.2 percent month-on-month in August.

“The key takeaway from the report is that the weakness in the permits data suggests the strength in starts is not sustainable, especially when also taking into account that mortgage rates have risen since the July-August period,” said analyst Patrick O’Hare at Briefing.com.

Asian markets meanwhile enjoyed a much-needed bounce Tuesday, tracking Wall Street’s late rally as investors gird themselves for another big Fed hike, though fears of a recession remain elevated.

Elsewhere on Tuesday, the British pound remained under pressure, even as the BoE lines up another rate hike, after sliding on Friday to a 1985 low at $1.1351.

– Key figures at around 1330 GMT –

London – FTSE 100: DOWN 0.4 percent at 7,207.87 points

Frankfurt – DAX: DOWN 0.8 percent at 12,696.14

Paris – CAC 40: DOWN 1.2 percent at 5,991.86

EURO STOXX 50: DOWN 0.8 percent at 3,470.70

New York – Dow: DOWN 0.8 percent at 30,775.29

Tokyo – Nikkei 225: UP 0.4 percent at 27,688.42 (close)

Hong Kong – Hang Seng Index: UP 1.2 percent at 18,781.42 (close)

Shanghai – Composite: UP 0.2 percent at 3,122.41 (close)

Euro/dollar: DOWN at $0.9960 from $1.0024 on Monday

Dollar/yen: UP at 143.85 yen from 143.21 yen

Pound/dollar: UP at $1.1384 from $1.1431

Euro/pound: DOWN at 87.51 pence from 87.70 pence 

Brent North Sea crude: DOWN 0.6 percent at $91.46 per barrel

West Texas Intermediate: UP 0.8 percent at $84.64 per barrel

burs-rl/lth

The European Union hopes to strike a free-trade agreement with Indonesia within two years despite disputes with Southeast Asia’s largest economy over palm oil and nickel, the bloc’s trade commissioner said Tuesday.

“We think it is feasible by mid-2024” to conclude a comprehensive economic partnership agreement, Valdis Dombrovskis told reporters in the Indonesian capital Jakarta. 

“We see there is some renewed momentum and we hope to build on that.”

The two sides opened bilateral negotiations on a trade deal in 2016 but progress has been stalled over EU restrictions on the use of palm oil-based biofuels and an Indonesian embargo on nickel exports.

Dombrovskis said the disputes needed to be resolved through negotiation and the World Trade Organization.

Indonesia and Malaysia have filed appeals at the WTO over the biofuels dispute.

As part of its “Red II” directive, the EU has decided that biofuels based on palm oil will not count towards its targets for the use of renewable energy by 2030 and it is looking to phase out their use.

The EU has filed its own WTO challenge against Indonesia over a temporary embargo imposed by Jakarta on exports of raw materials used in stainless steel, including nickel.

The trade commissioner is in Indonesia for a G20 ministerial meeting. He is also due to brief Indonesian officials on a proposed European law aimed at banning imports to the EU that contribute to deforestation.

The law’s text, which is not yet final, will affect several Indonesian sectors, including wood, palm oil and rubber.

“Of course there are questions being raised by the Indonesian side, so we’re going to explain how it will work and reassure the Indonesian side that it’s an environmental measure and not a measure to hinder access to the EU market,” Dombrovskis said.

Trade in goods between the EU and Indonesia amounted to $24.7 billion last year.

McDonald’s in Kyiv re-opened on Tuesday for the first time since Russia’s invasion, a sign that life was returning to normal in the capital after nearly seven months of war.

The US burger chain said in a statement earlier that “after talks with Ukrainian officials, security specialists and suppliers” it would re-open at first for delivery only.

A queue of delivery company employees formed outside one of restaurants waiting to collect orders on Tuesday.

“I think there will be a lot of excitement,” one of the delivery men told AFP while sitting on his motorbike. 

“I’m not going to rest today,” added Maksym Khadap, 19, yellow thermal backpack on his shoulders.

A customer said that he came to pick up his order from a deliveryman right outside the restaurant. 

“I made it to please my girlfriend, she is now at work, and I will bring it to her,” 24-year-old Oleksandr Khodarkovskyi told AFP with a smile on his face.

“She likes McDonald’s a lot, I’m giving her a surprise,” he said.

McDonald’s suspended operations in Ukraine on February 24 after Russia invaded.

“In October, these three restaurants will fully re-open along with McDrive and express windows,” the company said in its statement on Monday.

“As part of the phased reopening program, seven more stores in Kyiv will open, followed by additional restaurants in the capital and other cities in the west of the country,” it added.

With the chain shuttered in Russia, the highly anticipated relaunch was seen by many Ukrainians as a symbolic show of support.

McDonald’s earlier this year sold its Russian restaurants to businessman Alexander Govor after announcing a complete exit from the country.

It said continuing to work in Russia was “no longer tenable, nor is it consistent with McDonald’s values”.

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