US Business

Global stocks mostly rose on Wednesday as investor concerns over US-China tensions eased following House Speaker Nancy Pelosi’s trip to Taiwan.

Oil prices also marginally rose after the OPEC+ oil cartel, led by Saudi Arabia and Russia, agreed a small increase in production.

The decision to raise production by 100,000 barrels per day for September is likely to disappoint US President Joe Biden, who had lobbied for a big hike to tame soaring energy prices, analysts said.

Analyst Edward Gardner, of Capital Economics, warned however that “as has become increasingly glaring recently, though, an increase in quotas is not the same as an increase in production.”

Output is supposed to have returned to pre-Covid levels, but only on paper, as some members of the 23-nation group have struggled to meet their quotas.

The main contracts were only slightly higher, with Brent — the international benchmark — rising just over $100.

– ‘Rollercoaster ride’- 

Traders also nervously watched for reactions — so far — to Pelosi’s visit to Taiwan, which China considers a part of its territory.

“What China didn’t do has seemingly been the focal point,” said Patrick O’Hare, at Briefing.com.

“China didn’t take any action that would necessitate a military response from the US. That understanding has sparked a measure of relief for investors as Speaker Pelosi heads to South Korea,” he said.

The highest profile trip to Taiwan in 25 years by a US politician was met with condemnation from Beijing, which vowed “punishment”.

“This week was already shaping up to be another rollercoaster ride and Pelosi’s trip just added another layer of event risk for the markets,” Craig Erlam, an analyst at OANDA, said.

News of the visit had sent shivers on Tuesday through trading floors that were already on edge over the Ukraine war, surging inflation, rising interest rates and slowing economic growth.

However, most equity markets edged upwards on Wednesday.

London nudged higher on the eve of a widely-expected half-point interest rate hike by the Bank of England.

“There has been a lot of fear but no material effect,” AvaTrade analyst Naeem Aslam told AFP, when questioned about the markets impact of Pelosi’s visit.

“Hence, we see equities holding on to their gains and moving higher.” 

– Rate hikes –

Analysts are also keen to find out what the White House’s response will be, particularly ahead of mid-term elections in November, with anti-China rhetoric playing well with voters but Biden keen not to further harm economic ties.

SPI Asset Management’s Stephen Innes added that the US administration was probably not likely to cut Trump-era tariffs before then.

Wednesday’s broadly positive performance followed a drop on Wall Street, where the Taiwan news was compounded by a series of hawkish comments from Federal Reserve officials indicating more big interest rate hikes could still be in the pipeline.

– Key figures at around 1350 GMT –

London – FTSE 100: UP 0.3 percent at 7,434.31  points

Frankfurt – DAX: UP 0.4 percent at 13,496.38 

Paris – CAC 40: UP 0.7 percent at 6,453.31 

EURO STOXX 50: UP 0.8 percent at 3,713.60

New York – Dow: UP 0.7 percent at 32,631.29

Tokyo – Nikkei 225: UP 0.5 percent at 27,741.90 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,767.09 (close)

Shanghai – Composite: DOWN 0.7 percent at 3,163.67 (close)

Taipei – TAIEX: DOWN 0.2 percent at 14,777.02 (close)

Dollar/yen: UP at 133.61 yen from 133.10 yen Tuesday

Euro/dollar: UP at $1.0175 from $1.0166

Pound/dollar: DOWN at $1.2160 from $1.2170

Euro/pound: UP at 83.65 pence from 83.57 pence

Brent North Sea crude: UP 0.2 percent at $100.75 per barrel

West Texas Intermediate: UP 0.1 percent at $94.52 per barrel

burs/rfj-kjm/lth

Turkey’s annual inflation rate stabilised in July at just under 80 percent, official data showed on Wednesday, helping support President Recep Tayyip Erdogan’s pledges that runaway price increases would soon stop.

The official annual rate of consumer price increases reached 79.6 percent in July compared to 78.6 percent in June.

Turkey plunged into a fresh economic crisis when Erdogan set off on an unusual economic experiment nearly a year ago that attempted to bring down chronically high inflation by slashing interest rates.

Conventional economic theory, accepted by world governments, states that lower interest rates drive growth and push up prices by building up demand.

Turkey now has a real interest rate that factors in inflation of negative 64.4 percent — the lowest in the world by a substantial margin.

This means that Turks have a strong incentive to spend as much as they can before their liras lose even more value.

But Erdogan has repeatedly urged “patience” and vowed that prices would start falling again at the start of next year.

“A price stabilisation trend has already started,” Erdogan said two days before the latest inflation report was released.

“We hope that inflation will enter a significant downward trend in the first months of the new year.”

The central bank now forecasts the inflation rate to ease back down to roughly 40 percent by the time Erdogan is due to face a difficult re-election next July.

– Doubt in data –

Opposition leaders and many Turks no longer trust official government data.

The annual inflation rate reported this week in Istanbul — headed by a popular opposition party figure — was roughly 100 percent.

“Turkey’s official inflation and Istanbul’s inflation have historically moved in tandem,” the Turkish central bank’s former chief economist Hakan Kara tweeted.

“The difference, which has reached 19.5 percentage points in the last four months, is remarkable.”

But a respected monthly study released by independent economists from Turkey’s ENAG research institute also showed prices stabilising — although at a much higher rate than the one reported by the state statistics agency.

ENAG said the official annual rate of consumer price increases reached 176 percent in July compared to 174 percent in June.

The government’s July report showed price increases being led by a 119-percent jump in the cost of transportation.

This helps back government arguments that inflation is being driven by external factors such as soaring energy prices caused by Russia’s standoff with the West over its invasion in Ukraine.

Food and non-alcoholic prices rose by 95 percent because of the sharp depreciation of the lira that makes imports more expensive.

The Turkish currency has lost more than half its value against the dollar in the past 12 months.

It now trades at nearly 18 to the dollar compared to the 3.5 mark at which it stood in 2018.

Erdogan’s popularity has suffered badly in the second decade of his rule as a result.

A poll of polls released this week showed him losing in a runoff against any of the top five potential challengers to his rule.

German Chancellor Olaf Scholz on Wednesday raised the possibility of keeping nuclear plants going as he accused Russia of blocking the delivery of a key turbine to throttle gas supplies to Europe.

The continent’s biggest economy has been scrambling for energy sources to fill a gap left by a reduction in gas supplies from Moscow. 

Standing next to the turbine, Scholz said that extending the lifetime of Germany’s three remaining nuclear power plants “can make sense”.

The power stations, which are set to be taken off the grid at the end of the year, were “relevant exclusively for electricity production, and only for a small part of it,” Scholz said.

In total, the nuclear fleet accounts for six percent of Germany’s electricity output.

The government has said it will await the outcome of a new “stress test” of the national electric grid before determining whether to stick with the long-planned phaseout.

– Nuclear switch –

Former Chancellor Angela Merkel spectacularly decided to ditch atomic energy in 2011 following the Fukushima nuclear disaster in Japan.

Extending the lifetime of the plants has set off a heated debate in Germany, where nuclear power has been a source of controversy stretching back before Merkel’s move.

The question has split the governing coalition, with Scholz’s Social Democrats and the Greens hitherto sceptical, and the FDP favouring an extension.

Germany has already moved to restart mothballed coal power plants to guard against an energy shortfall.

The first of these was already “supplying electricity to the network”, Scholz said Wednesday, adding that Germany had to prepare for a “difficult time”. 

The squeeze comes as Russia dwindles supplies of gas, which Germany has long relied on to power industry and heat homes.

Russian energy giant Gazprom has chalked up limited supplies to technical issues.

The delayed return of a turbine from Canada, where the unit was being serviced, was behind the initial reduction in deliveries via the Nord Stream 1 gas pipeline in June, according to Gazprom.

Supplies via the energy link were further reduced to around 20 percent of capacity in late July, after Gazprom halted the operation of one of the last two operating turbines due to the “technical condition of the engine”.

– Turbine trouble –

Berlin has dismissed Gazprom’s justifications for the reduction to supply, seeing instead a “political” move in response to the West’s support for Ukraine.

The turbine which was transferred from Canada to Germany was “available and working”, Scholz said Wednesday.

“There is no reason why this delivery cannot happen,” he said, adding that it had received “all the approvals” needed for export from Germany to Russia.

Pipeline operators only had to say “they want to have the turbine and provide the necessary customs information for transport to Russia”, Scholz said.

But Kremlin spokesperson Dmitry Peskov insisted that Gazprom was still waiting for documents confirming the unit was “not affected by sanctions”.

It was however “technologically possible” in the opinion of Russian President Vladimir Putin to continue deliveries via the Nord Stream 2 pipeline, Peskov said.

The second pipeline, which runs parallel to Nord Stream 1, stands completed but was blocked by the German government in the run up to the invasion of Ukraine.

Former Chancellor Gerhard Schroeder, who signed off on the pipeline while in office, told German magazine Stern it was “the easiest solution” to use Nord Stream 2 instead.

But Scholz has rejected the call, saying Nord Stream 1 provided sufficient capacity for gas flows. 

Moscow’s move to limit supplies sent a “difficult message” to the world by creating doubt over Russia’s commitment to its agreements, he added.

The OPEC+ group of major oil exporters began talks on its output strategy on Wednesday after US President Joe Biden lobbied Saudi Arabia to boost production to tame soaring prices.

The cartel led by Saudi Arabia and Russia has so far resisted US pressure to ramp up production significantly after Moscow’s invasion of Ukraine sent oil prices soaring.

After cutting production in 2020 in response to falling prices during the Covid pandemic, OPEC+ began to modestly raise it last year and has renewed the policy every month.

Its output is supposed to have returned to pre-Covid levels — but only on paper, as some members of the 23-nation group have struggled to meet their quotas.

Craig Erlam, analyst at OANDA trading platform, said the OPEC+ meeting will show whether “President Biden has any influence in the cartel at all”.

The OPEC+ group began technical talks early afternoon, to be followed by a ministerial meeting by videoconference.

Biden made a controversial trip to Saudi Arabia in July in part to convince the kingdom to loosen the production taps to stabilise the market and curb rampant inflation.

The US president met Crown Prince Mohammed bin Salman despite his promise to make the kingdom a “pariah” in the wake of the 2018 killing of journalist Jamal Khashoggi.

Biden said after his meetings with Saudi officials that he was “doing all I can” to increase the oil supply.

“Saudi Arabia and its allies will have to decide whether to heed Joe Biden’s request and raise production or show solidarity towards Russia by staying put,” said Tamas Varga, analyst at oil broker PVM.

French President Emmanuel Macron also reached out to bin Salman, hosting him last week in Paris, with Macron’s office saying the two leaders agreed to work “to ease the effects” of the Ukraine war.

Before resigning as British prime minister, Boris Johnson had also visited bin Salman in Riyadh in March to lobby for higher oil production.

But Stephen Innes, managing partner at SPI Asset Management, said OPEC+ is “unlikely to announce a significant production increase given growing recession fears” and a drop in oil prices since early June.

– More cautious? –

After reaching close to $140 per barrel in early March, crude prices have slid further this week following weak economic data from China, the world’s biggest importer of oil.

The main contracts were slightly down on Wednesday ahead of the meeting, with Brent — the international benchmark — slipping back under $100.

This week’s price slide “could make OPEC+ more cautious”, Commerzbank said in a note.

The German bank said news that Libyan production has returned to normal levels for the first time in nearly four months could also serve as an argument against a bigger expansion in output.

OPEC+ began to add around 400,000 barrels per day to the market last year, renewing the policy every month until June, when it upped production by almost 650,000 bpd.

Analysts say the group has now reversed cuts totalling 9.7 million bpd that had been agreed in 2020, though only in theory.

Global stocks mostly rose Wednesday as traders tracked House Speaker Nancy Pelosi’s visit to Taiwan, which has further strained China-US ties.

The highest profile trip to Taiwan in 25 years by a US politician met with condemnation from Beijing, which warned of serious economic and military consequences.

The news had sent shivers on Tuesday through trading floors that were already on edge over the Ukraine war, surging inflation, rising interest rates and slowing economic growth.

However, most equity markets edged upwards on Wednesday.

London nudged higher on the eve of a widely-expected half-point interest rate hike in Britain.

Oil prices slid as the OPEC+ group of major oil exporters convened to discuss output strategy.

Meanwhile, Pelosi departed Taiwan on Wednesday evening, ending her controversial landmark visit that Beijing responded to with threats and military drills.

– Equities hold gains –

“There has been a lot of fear but no material effect,” AvaTrade analyst Naeem Aslam told AFP, when questioned about the markets impact of Pelosi’s visit.

“Hence, we see equities holding on to their gains and moving higher.” 

Analysts are also keen to find out what the White House’s response will be, particularly ahead of mid-term elections in November with anti-China rhetoric playing well with voters, but President Joe Biden keen not to further harm economic ties.

SPI Asset Management’s Stephen Innes added that the US administration was probably not likely to cut Trump-era tariffs before then.

Wednesday’s broadly positive performance followed a drop on Wall Street, where the Taiwan news was compounded by a series of hawkish comments from Federal Reserve officials indicating more big interest rate hikes could still be in the pipeline.

Stocks rallied last week and Treasury yields dropped after boss Jerome Powell hinted the bank could begin slowing down, but the latest remarks suggest a hoped-for dovish pivot might not be coming just yet as inflation remains stubbornly high.

– Key figures at around 1030 GMT –

London – FTSE 100: UP 0.1 percent at 7,413.24 points

Frankfurt – DAX: UP 0.2 percent at 13,478.84

Paris – CAC 40: UP 0.2 at 6,421.76

EURO STOXX 50: UP 0.4 percent at 3,699.33

Tokyo – Nikkei 225: UP 0.5 percent at 27,741.90 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,767.09 (close)

Shanghai – Composite: DOWN 0.7 percent at 3,163.67 (close)

Taipei – TAIEX: DOWN 0.2 percent at 14,777.02 (close)

New York – Dow: DOWN 1.2 percent at 32,396.17 (close)

Dollar/yen: DOWN at 133.04 yen from 133.10 yen Tuesday

Euro/dollar: UP at $1.0196 from $1.0166

Pound/dollar: UP at $1.2185 from $1.2170

Euro/pound: UP at 83.68 pence from 83.57 pence

Brent North Sea crude: DOWN 0.9 percent at $99.62 per barrel

West Texas Intermediate: DOWN 0.6 percent at $93.88 per barrel

burs/rfj/bp

French satellite company Eutelsat on Wednesday halted European broadcasts of Russian channel NTV Mir after regulators flagged content it had aired comparing Ukrainians to Nazis.

Media regulator Arcom asked for the Russian channel to be blocked because it had repeatedly portrayed not only Ukraine’s leaders but also its population as adhering to Nazi ideology.

Eutelsat has already taken down several Russian channels after requests from the European Union and individual countries dismayed at the dissemination of what they regard as pro-Kremlin propaganda since the February 24 invasion of Ukraine.

NTV Mir’s parent company was sanctioned by the United States in May, the White House labelling it state-owned and alleging its revenue from overseas advertising was fed back to the Kremlin. 

The French regulator said on its website that the channel “tends to repeatedly portray not only the Ukrainian leadership and the Ukrainian army, but also and above all the Ukrainian population, as adhering to the Nazi ideology of the Third Reich”.

Arcom cited a broadcast on 24 April that characterised Ukrainian President Volodymyr Zelensky as “a comedian in the role of Hitler who ordered a missile to be fired at women and children”. 

Eutelsat carries the NTV Mir in Europe but when asked by AFP could not confirm which countries would be affected by the ban.

Arcom said it was possible that NTV Mir could still be picked up on other non-European satellites with more limited coverage on the continent.

Since the Russian invasion, Eutelsat has halted broadcasts of news channel RT in several countries as well as two other Russian state broadcasters, Russia 24 and RTR Planeta.

German Chancellor Olaf Scholz on Wednesday accused Russia of blocking the delivery of a turbine needed to keep gas flowing to Europe via the Nord Stream 1 pipeline.

As the continent’s biggest economy scrambled for energy sources to fill the gap left by Russia’s throttling of supplies, Scholz also opened the door to keeping Germany’s remaining nuclear plants running.

Standing next to the turbine, currently stuck with maker Siemens Energy in Germany, Scholz said the unit was “available and working”.

“There is no reason why this delivery cannot happen,” the chancellor said.

The turbine had received “all the approvals” it needed for export from Germany to Russia, he said.

Pipeline operators only needed to say that “they want to have the turbine and provide the necessary customs information for transport to Russia”, Scholz said, adding that the transfer was “really easy”.

Russian energy giant Gazprom has blamed the delayed return of the unit from Canada, where it was being serviced, for the initial reduction in deliveries of gas via the Nord Stream 1 gas pipeline in June.

Officials in Berlin worked with their counterparts in Canada to expedite the return of the turbine but the unit has yet to reach its final destination.

Deliveries via the undersea energy link were reduced to around 20 percent of capacity in late July, after Gazprom halted the operation of one of the last two operating turbines due to the “technical condition of the engine”.

Germany, which is heavily dependent on Russian gas, has branded the decision to limit supplies as a “political” response over the West’s support for Ukraine.

Scholz said Moscow’s move to limit supplies sent a “difficult message” to the world by creating doubt over Russia’s commitment to its agreements.

– Nuclear debate –

Germany has been working to wean itself off Russian energy imports since the invasion of Ukraine in February.

But the reduction of gas supplies has left Europe’s largest economy facing potential shortages over the winter, leading to calls for Germany’s nuclear power plants to be kept online beyond the end of the year. 

Scholz said Wednesday that it “can make sense” to keep Germany’s remaining three nuclear plants running, despite the long-planned stop.

“As far as the energy supply in Germany is concerned, the three last nuclear plants are relevant exclusively for electricity production, and only for a small part of it,” Scholz said.

The plants, scattered across the country, account for six percent of Germany’s electricity supply. 

The government has said it will await the outcome of a new “stress test” of the national electric grid before determining whether to stick with the phaseout.

Extending the lifetime of the plants has set off a heated debate in Germany, where nuclear energy has long been controversial.

The question has split the governing coalition, with Scholz’s Social democrats and the greens hitherto sceptical, and the FDP favouring an extension.

Germany has already moved to restart mothballed coal power plants to guard against an energy shortfall.

The first of these was already “supplying electricity to the network”, Scholz said Wednesday, adding that Germany had to prepare for a “difficult time”. 

The OPEC+ group of major oil exporters meets Wednesday to discuss its output strategy after US President Joe Biden lobbied Saudi Arabia to boost production to tame soaring prices.

The cartel led by Saudi Arabia and Russia has resisted US pressure to ramp up production significantly so far after Moscow’s invasion of Ukraine sent oil prices soaring.

After cutting production in 2020 in response to falling prices during the Covid pandemic, OPEC+ began to modestly raise it last year and has renewed the policy every month.

Its output is supposed to have returned to pre-Covid levels — but only on paper as some members of the 23-nation group have struggled to meet their quotas.

Craig Erlam, analyst at OANDA trading platform, said the OPEC+ meeting will show whether “President Biden has any influence in the cartel at all”.

Biden made a controversial trip to Saudi Arabia in July in part to convince the kingdom to loosen the production taps to stabilise the market and curb rampant inflation.

The US president met with Crown Prince Mohammed bin Salman despite his promise to make the kingdom a “pariah” in the wake of the 2018 killing of journalist Jamal Khashoggi.

Biden said after his meetings with Saudi officials that he was “doing all I can” to increase the oil supply.

“Saudi Arabia and its allies will have to decide whether to heed Joe Biden’s request and raise production or show solidarity towards Russia by staying put,” said Tamas Varga, analyst at oil broker PVM.

French President Emmanuel Macron also reached out to bin Salman, hosting him last week in Paris, with Macron’s office saying the two leaders agreed to work “to ease the effects” of the Ukraine war.

Before resigning as British prime minister, Boris Johnson had also visited bin Salman in Riyadh in March to lobby for higher oil production.

But Stephen Innes, managing partner at SPI Asset Management, said OPEC+ is “unlikely to announce a significant production increase given growing recession fears” and a drop in oil prices since early June.

– More cautious? –

After reaching close to $140 per barrel in early March, crude prices have slid further this week following weak economic data from China, the world’s biggest importer of oil.

The main contracts were slightly down on Wednesday ahead of the meeting, though Brent — the international benchmark — was back above $100.

This week’s price slide “could make OPEC+ more cautious”, Commerzbank said in a note.

The German bank said news that Libyan production has returned to normal levels for the first time in nearly four months could also serve as an argument against a bigger expansion in output.

OPEC+ began to add around 400,000 barrels per day to the market last year, renewing the policy every month until June, when it upped production by almost 650,000 bpd.

Analysts say the group has now reversed cuts totalling 9.7 million bpd that had been agreed in 2020, though only in theory.

Asian markets mostly rose Wednesday after the previous day’s reverse, though traders remained on edge after House Speaker Nancy Pelosi’s visit to Taiwan, which has further strained China-US ties and raised concerns about the long-term impact on the global outlook.

The highest profile trip to the island in 25 years by a US politician was met with condemnation from Beijing, which warned of serious economic and military consequences.

Taiwan said more than 20 Chinese military aircraft had flown into the island’s air defence identification zone — an area wider than its territorial airspace that overlaps with part of China’s air defence zone. The People’s Liberation Army was also due to conduct a series of drills, while Foreign Minister Wang Yi vowed to “punish” those who offended the country.

Beijing said it would suspend imports of some citrus fruits and fish from Taiwan over alleged “repeated” detection of excessive pesticide residue and positive coronavirus tests on packages, while exports of natural sand were also halted, with no details provided.

Taiwan President Tsai Ing-wen struck a defiant tone at her meeting with Pelosi, saying the island “will not back down. We will… continue to hold the line of defence for democracy”.

At the event, Pelosi said her delegation “came to Taiwan to make unequivocally clear we will not abandon our commitment to Taiwan”.

No one expected it would spark a conflict, but the crisis sent shivers through trading floors that were already on edge over a range of issues including the Ukraine war, surging inflation, rising interest rates and slowing economic growth.

However, Asia enjoyed a small recovery, though some markets pared morning gains.

Hong Kong, Taipei, Tokyo, Singapore, Seoul, Wellington, Jakarta and Manila all rose, though Shanghai, Mumbai, Sydney and Bangkok edged down.

London, Paris and Frankfurt all fell at the open.

The “short-term implication may be ‘sell the rumour, buy the news’ as the official response so far remains much more restrained versus what the market has feared,” Xiadong Bao, at Edmond de Rothschild Asset Management, said.

“But the mid/long-term implication can be more significant, which may be currently overlooked by the market. The official return of the US influence in Asia-Pacific will inevitably accelerate US-China decoupling.”

Analysts are also keen to find out what the White House’s response will be, particularly ahead of mid-term elections in November with anti-China rhetoric playing well with voters, but with President Joe Biden keen not to further harm economic ties.

SPI Asset Management’s Stephen Innes added that the US administration was probably not likely to cut Trump-era tariffs before then.

The broadly positive performance in Asia followed a drop on Wall Street, where the Taiwan crisis was compounded by a series of hawkish comments from Federal Reserve officials indicating more big interest rate hikes could still be in the pipeline.

Stocks rallied last week and Treasury yields dropped after boss Jerome Powell hinted the bank could begin slowing down, but the latest remarks suggest a hoped-for dovish pivot might not be coming just yet as inflation remains stubbornly high.

“This round of Fed speak suggests markets might be a little too optimistic into pricing in a Fed pivot and that rate cut calls for next year are too optimistic,” said OANDA’s Edward Moya.

The latest developments have raised concerns that the volatility on markets would likely continue for some time.

“It’s hard to see any meaningful upside in equities right now,” said Xi Qiao, of UBS Group. “The market is going to trade pretty mixed, stay choppy until we have a little bit more certainty,” she told Bloomberg News.

– Key figures at around 0810 GMT –

Tokyo – Nikkei 225: UP 0.5 percent at 27,741.90 (close)

Hong Kong – Hang Seng Index: UP 0.4 percent at 19,767.09 (close)

Shanghai – Composite: DOWN 0.7 percent at 3,163.67 (close)

Taipei – TAIEX: DOWN 0.2 percent at 14,777.02 (close)

London – FTSE 100: DOWN 0.3 percent at 7,386.52

Dollar/yen: UP at 133.19 yen from 133.10 yen Tuesday

Euro/dollar: UP at $1.0183 from $1.0168

Pound/dollar: UP at $1.2206 from $1.2163

Euro/pound: UP at 83.43 pence from 83.57 pence

West Texas Intermediate: DOWN 0.9 percent at $93.60 per barrel

Brent North Sea crude: DOWN 0.9 percent at $99.63 per barrel

New York – Dow: DOWN 1.2 percent at 32,396.17 (close)