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The European Union agreed to reduce gas consumption to break its dependence on Russia on Tuesday, as missile strikes on Ukraine’s Black Sea coast cast doubt on a grain export deal.

The effort to help Germany wean itself off Russian gas for the winter came as Turkey announced a meeting in Russia next week between Turkish President Recep Tayyip Erdogan and his Russian counterpart Vladimir Putin.

Erdogan wants Turkey — on good terms with both Moscow and Kyiv — at the centre of diplomatic efforts to halt the five-month war, just as the EU took another big step to cut ties to Moscow.

The EU gas use cut, approved by energy ministers in Brussels, was hailed as an effective response to Russia’s manipulation of its energy wealth as an economic weapon.

The plan nominally commits EU countries to reduce their gas use by 15 percent during the winter, although exceptions were carved out for some countries and Hungary rejected the deal as “useless”. 

“We have made a huge step towards securing gas supplies for our citizens and economies for the upcoming winter,” said Czech industry minister Jozef Sikela, whose country holds the rotating EU presidency.

“I know the decision was not easy, but I think at the end, everybody understands that this sacrifice is necessary,” he added.

Hungary was the only country to oppose the plan, which passed on a majority vote, further isolating Budapest as the only member state reluctant to go further against Russia.

“This is an unjustifiable, useless, unenforceable and harmful proposal that completely ignores national interests,” said Hungarian Foreign Minister Peter Szijjarto.

The deal “serves purely communication purposes, and aims to save the credibility of some Western European politicians”, he added. 

– German ‘mistake’ –

Germany, the EU’s economic powerhouse, is hugely dependent on Russian gas. Berlin takes a major share of the 40 percent of EU gas imports that came from Russia last year. 

“It is true that Germany, with its dependence on Russian gas, has made a strategic mistake but our government is working… to correct this,” German Economy Minister Robert Habeck said. 

The plan asks member states to voluntarily reduce gas use by 15 percent — based on a five-year average for the months in question — starting next month and over the subsequent winter through March.

The target will be adapted to the situation of each country, taking into account their level of stocks and whether or not they have pipelines to share gas. 

Exceptions were given for island states like Ireland, Cyprus or Malta and to Spain or Portugal, which have limited links to the interconnected gas supply grid. 

Baltic countries will be exempted if their electricity connections with Russia’s grid were to be cut.

In the final proposal, EU member countries also rewrote an earlier European Commission plan to give Brussels — rather than the member states — the power to impose gas use cuts in an emergency.

The regulation now foresees the possibility to trigger a “Union alert” that would make the target mandatory, but the decision would lie with member states, a statement said.

The deal landed a day after Gazprom said it is cutting daily gas deliveries intended for Europe to about 20 percent of capacity from Wednesday.

Gazprom claimed technical reasons for choking off supply, but EU Energy Commissioner Kadri Simson dismissed this claim.

“This is a politically motivated step and we have to be ready for that and exactly for that reason the pre-emptive reduction of our gas demand is a wise strategy,” she said.

The extent of Russia’s split with the West over Ukraine was also underlined by Moscow’s announcement that it would quit the International Space Station after 2024.

Until now space exploration was one of the few areas where cooperation between Russia, the United States and its allies had not been wrecked by tensions over Ukraine and elsewhere.

The decision to leave the ISS programme “has been made”, Roscosmos chief Yury Borisov told Putin.

– Strikes near Odessa –

Meanwhile, fighting continued in Ukraine. Kyiv said Russian forces launched multiple missile strikes at targets on the Black Sea coast near the southern port city of Odessa and in Mykolaiv. 

The attacks come days after Russian strikes hit Odessa, calling into question a breakthrough deal to resume exports of grain from Ukraine, that have been disrupted by Moscow’s invasion.

Rescuers were working on the ground near Odessa where “residential buildings” near the coast were hit in the strikes, Ukraine’s southern military command said on Facebook.

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Amazon Prime customers in five European countries learned Tuesday that they face double-digit price increases for the platform’s expedited delivery service.

Amazon said the rises were due to increased operating costs as fuel prices have jumped higher.

Beginning in mid-September, customers in France will have to pay 43 percent more for an annual subscription. Italians face a 38.6-percent hike, Spaniards 30.3 percent, and Britons and Germans 20 percent.

The rises take the price of Prime, which in addition to rapid delivery includes access to its Prime Video service, to 49.90 euros in Italy and Spain. It will be 89.90 euros in France and Germany, and 95 pounds (around 112 euros) in Britain.

That leaves the service less costly than in the United States, where it rose by 17 percent in February to $139 per year (137 euros).

While the price hikes are much higher than inflation, analysts believe that the service costs Amazon much more than it charges and is used to lure and keep customers.

Market intelligence firm Foxintelligence estimated last year that European members of Prime bought on average twice as much on Amazon than non-members. 

A handful of angry customers announced their intention to cancel the service on Twitter.

However, Amazon representatives in France were unfazed.

“What we could see in the United States was there wasn’t an opt-out surge because more and more services are offered via Prime and it still allows consumers to realise very considerable savings,” said the firm.

Surging inflation and severe slowdowns in the United States and China prompted the IMF Tuesday to downgrade its outlook for the global economy this year and next, while giving an even starker assessment of what may lie ahead.

“The outlook has darkened significantly since April,” said IMF chief economist Pierre-Olivier Gourinchas. “The world may soon be teetering on the edge of a global recession, only two years after the last one.”

“The world’s three largest economies, the United States, China and the euro area are stalling with important consequences for the global outlook,” he said at a briefing.

In its latest World Economic Outlook, the International Monetary Fund cut the 2022 global GDP estimate to 3.2 percent, four-tenths of a point lower than the April forecast, and about half the rate seen last year.

Last year’s “tentative recovery” from the pandemic downturn “has been followed by increasingly gloomy developments in 2022 as risks began to materialize,” the report said.

“Several shocks have hit a world economy already weakened by the pandemic,” including the war in Ukraine which has driven up global prices for food and energy, prompting central banks to raise interest rates sharply, the IMF said.

Ongoing Covid-19 lockdowns and a worsening real estate crisis have hindered economic activity in China, while the Federal Reserve’s aggressive interest rate hikes are slowing US growth sharply.

But the bad news may not stop there, IMF warned, saying that “risks to the outlook are overwhelmingly tilted to the downside,” and if they materialize could push the global economy into one of the worst slumps in the past half-century.

Key among concerns is the fallout from the Ukraine war including the potential for Russia to cut off natural gas supplies to Europe, as well as a further spike in prices and the specter of famines due to the war’s chokehold on grain supplies.

In an ominous warning, the WEO said “such shocks could, if sufficiently severe, cause a combination of recession accompanied by high and rising inflation (‘stagflation’).”

That would slam the brakes on growth, slowing it to 2.0 percent in 2023. The global growth rate has only been slower five times since 1970, the report said. 

Gourinchas said that would be “getting really close to a global recession.”

– Inflation priority –

The top priority for policymakers is to rein in soaring prices, even if it means pain for their citizens, the fund said, since the damage caused by out-of-control inflation would be much worse.

Gourinchas, in a blog post about the report, noted that the “synchronized” moves by major central banks to deal with the inflation threat “is historically unprecedented, and its effects are expected to bite.”

“Tighter monetary policy will inevitably have real economic costs, but delaying it will only exacerbate the hardship,” he said.

The IMF now sees consumer prices jumping 8.3 percent this year, nearly a full point higher than previously forecast, while emerging market economies face a 9.5 percent increase in consumer prices.

But, “further supply-related shocks to food and energy prices from the war in Ukraine could sharply increase headline inflation.”

That would increase the pain for poor nations least able to withstand the shock, where food makes up a larger share of family budgets.

– US, China slowdown –

While the global economy did a bit better than expected in the first three months of the year, it appears to have “shrunk in the second quarter — the first contraction since 2020,” the IMF said.

The IMF downgraded growth forecasts for most countries, including big revisions for the United States and China, cutting more than a point off the prior forecasts.

The fund now sees US growth this year of just 2.3 percent, amid slowing consumer spending and rising interest rates, and the report said a recession — defined by two quarters of negative growth — may already have begun.

Gourinchas said the US has a “very narrow path” to avoid a downturn, and even a “small shock” could tip the economy into recession.

China’s economy is expected to slow dramatically in 2022, expanding just 3.3 percent — the lowest in more than four decades with the exception of the 2020 pandemic crisis — due to continuing Covid concerns and a “worsening” property crisis, the report said.

“The slowdown in China has global consequences: lockdowns added to global supply chain disruptions and the decline in domestic spending are reducing demand for goods and services from China’s trade partners,” the report said.

There were some exceptions to the gloomy outlook, including upgrades for Italy, Brazil and Mexico, as well as for Russia which is still expected to contract but is benefiting from rising oil prices due to Western sanctions, the WEO said.

When Oliver Blume ascends to the top job at German automaker Volkswagen in September, he will be faced with taming the challenges that led to the fall of his predecessor, Herbert Diess, last week.

Serial technical troubles at Europe’s largest carmaker, as well as fractious relationships with workers’ representatives spelled the end of the road for Diess as chief executive, who was ousted in a supervisory board coup.

Blume is moving up from Porsche, VW’s premium sports car brand, which is set to go public later this year during a turbulent time for markets. 

In his four years at the helm of Volkswagen, 63-year-old Diess steered the legacy carmaker out of its 2015 “dieselgate” emissions-cheating scandal onto an ambitious programme to become the world’s biggest electric car manufacturer by 2025.

But difficulties at VW’s software arm, Cariad, a pet project of Diess’s, have delayed key plans and made it harder to catch up with competitors like US manufacturer Tesla.  

Software is the “number-one challenge”, said Matthias Schmidt, an auto analyst based in Berlin.

Bringing software development in-house, shedding outside suppliers and keeping control of computing architecture of the car, is difficult to achieve, but has potentially huge financial benefits.

Blume “needs to decide whether he will continue to follow Diess’s plan” or make a strategic decision to “buy it in” and “live with the consequence of seeing that potential profit centre vanish”, Schmidt told AFP.

“The idea of doing everything in a centralised way will probably be rethought,” said German automotive expert Ferdinand Dudenhoeffer.

– Unanimous vote –

In addition to the troubles at Cariad, Diess’s position as CEO was weakened by running battles with workers’ representatives.

The tendency of Austrian-born Diess to rub people up the wrong way and the proliferation of internal spats were the main reason for his exit, according to a source at the carmaker.

There were no dissenters on the vote to finally eject him, just before the start of the summer holidays.

Diess “had enemies” and was “not liked by the politicians or the works council” represented on the supervisory board, Dudenhoeffer said.

The outgoing CEO’s propensity for conflict was “very important” to get the group to face up to its past and find a new direction, he said.

But the task at hand was to carry out the changes Diess had identified as necessary, not to keep bashing heads together, Dudenhoeffer added.

– ‘Cooperative’ –

Blume is likely to steer clear of the provocative comparisons with US competitors and strongly worded tweets that won Diess few friends. 

The new chief, who has spent his entire career at Volkswagen, is more “cooperative” than Diess, who was hired from rival German carmaker BMW, Dudenhoeffer said.

Chief financial officer Arno Antlitz will bring continuity to the top team at Volkswagen, adding chief operating officer to his portfolio of roles.

Blume will “continue Diess’s big strategic projects”, said Dudenhoeffer, including making VW’s own batteries, building a modern factory close to its headquarters in Wolfsburg and developing mobility services with the reacquisition of rental company Europcar.

Blume will take the steering wheel of the group on September 1, while also retaining his CEO role at Porsche, which is set for a stock market entry in the last three months of 2022.

Blume would likely stay at Porsche through the flotation before having to “concentrate on managing the VW group machine”, said Schmidt.

The future CEO “will be judged on VW’s success in China” and the US, two key markets where Volkswagen has struggled in recent times, said Dudenhoeffer.

McDonald’s reported lower profits Tuesday following the hit from its Russia withdrawal, as it keeps a close eye on restaurant traffic amid rising consumer inflation.

The US restaurant chain scored higher comparable sales in most major markets except China, where Covid-19 restrictions hit sales.

This included a strong performance in Europe, where the chain highlighted France and Germany as especially robust markets. 

However, Chief Executive Chris Kempczinski cited surveys showing weakening consumer sentiment as a source of unease.

“The headline is Europe is doing very well for us,” Kempczinski told analysts on a conference call. 

“What is weighing on our mind is consumer sentiment,” he said, adding that the company is pondering how heavily to “lean in” to value offerings in Europe.

“Because of this uncertainty around consumer sentiment, we’re having to plan for more scenarios,” he said.

McDonald’s reported profits of $1.2 billion, down 46 percent from the year-ago period on a three percent drop in revenues to $5.7 billion.

Results were dented by $1.2 billion in costs connected to McDonald’s sudden sale of its Russia business in the wake of the country’s invasion of Ukraine.

As a more affordable restaurant chain, McDonald’s is potentially positioned to pick up sales from lower-income consumers.

But the company is also seeing cost pressures.

In the United States, McDonald’s expects about 12-14 percent inflation on food and paper in 2022 and a little over 10 percent on labor, said Chief Financial Officer Kevin Ozan.

McDonald’s expects a moderation in US inflation in the fourth quarter. Such an ebbing in pressure is not expected in overseas markets.

“In general, on the inflation side it will hit a little bit harder than in the US and little bit longer than in the US,” Ozan said.

McDonald’s shares edged down 0.2 percent to $249.77 in early trading.

Eurozone equities sank Tuesday, as natural gas prices surged after Russia tightened the screw on supplies in fresh Ukraine fallout.

Investors also digested major earnings updates on the eve of another likely large US interest rate hike aimed at tackling soaring inflation.

General Motors reported a big drop in second-quarter profits owing to a semiconductor shortage.

Google parent Alphabet, Coca-Cola, Microsoft and McDonald’s are also publishing results Tuesday.

Europe gas reference price Dutch TTF surged more than 10 percent to 198.00 euros per megawatt hour, one day after Russia’s Gazprom said it would cut daily gas deliveries to Europe via the Nord Stream pipeline.

“With no clear timeline for when capacity is likely to increase, the prospect of further uncertainty over gas supplies is weighing on European markets today,” CMC Markets analyst Michael Hewson told AFP.

Frankfurt’s DAX slumped 0.9 percent while the CAC in Paris shed 0.5 percent. 

“The euro is also under pressure as it becomes increasingly apparent that a slowing economy will make it increasingly difficult for the ECB to hike aggressively as we head into the winter months. Good luck raising rates against that sort of backdrop,” he added.

It fell by more than one percent to under $1.0150.

Eurozone bond yields also fell as investors fled to the relative safety of government debt.

Oil prices also leapt on concerns of a broader squeeze on global energy supplies, while the euro remained on the back foot against the dollar.

Gazprom will cut the gas deliveries to 33 million cubic metres a day — about 20 percent of the pipeline’s capacity — from Wednesday.

That has heightened market worries over supplies during the northern hemisphere winter later this year.

At the same time, European Union member states have reached agreement on how to cut their consumption of gas by 15 percent and reduce their dependence on Russian energy.

Gas prices remain way below the record March peak of 345 euros struck after Russia launched its assault on Ukraine.

Markets.com analyst Neil Wilson predicted a “big push to fill (gas) stockpiles in what is left of the summer, at any price, to avert a winter crisis”.

EU states have accused Russia of squeezing supplies in retaliation for Western sanctions.

Elsewhere Tuesday, Asian stock markets closed mixed.

Investors welcomed news that e-commerce giant Alibaba would seek a primary listing in Hong Kong, which could pave the way for it to be traded by mainland Chinese investors.

Wall Street opened lower, with a profit warning by Walmart rattling investors.

The retailer said it expects its earnings per share in its non-standard second quarter, which wraps up at the end of this month, to be down by 8-9 percent with an even bigger reduction next year.

Walmart shares tumbled more than eight percent at the start of trading.

“The basis for Walmart’s warning, though, is the real issue for the broader market,” said Patrick J. O’Hare at Briefing.com.

The retailer said food and fuel inflation was pushing consumers to defray discretionary spending on general merchandise.

“That is causing concerns about a trickle-down effect to other retailers, as well as suppliers to Walmart, that is weighing on sentiment and earnings expectations,” said O’Hare.

He said this was also fanning fears the US Federal Reserve, which meets Wednesday and Thursday, will pursue aggressive rate hikes to tame inflation.

– Key figures at around 1330 GMT –

Frankfurt – DAX: DOWN 0.9 percent at 13,092.50 points

Paris – CAC 40: DOWN 0.5 percent at 6,205.54

London – FTSE 100: UP 0.2 percent at 7,323.32

EURO STOXX 50: DOWN 0.8 percent at 3,576.87

New York – Dow: DOWN 0.2 percent at 31,917.53

Tokyo – Nikkei 225: DOWN 0.2 percent at 27,655.21 (close)

Hong Kong – Hang Seng Index: UP 1.7 percent at 20,905.88 (close)

Shanghai – Composite: UP 0.8 percent at 3,277.44 (close)

Euro/dollar: DOWN at $1.0140 from $1.0223 Monday

Pound/dollar: DOWN at $1.2016 from $1.2046 

Euro/pound: DOWN at 84.46 pence from 84.83 pence

Dollar/yen: DOWN at 136.45 yen from 136.65 yen

Brent North Sea crude: UP 1.6 percent at $106.87 per barrel

West Texas Intermediate: UP 1.5 percent at $98.17 per barrel

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China’s biggest tech hub is rushing to stamp out a fresh Covid outbreak, ordering some of the country’s biggest manufacturers to operate in a ‘closed loop’ to reduce infections, state media reported.

The city of Shenzhen, which borders Hong Kong, reported just 19 Covid cases Tuesday as the city’s health authority said the risk of “large-scale spread is low”.

But Beijing’s reluctance to budge from its strict zero-Covid policy had led to daily mass testing for the 13 million residents of Shenzhen for over a week and the closure of at least three subway stations by Tuesday.

Top manufacturers including iPhone maker Foxconn, electric carmaker BYD, drone maker DJI and telecom equipment maker ZTE are among the companies told to operate under a “closed-loop” production system. 

It would restrict movement of employees for seven days, state-run business news site Yicai reported Monday.

The closed-loop operation mode involves control measures such as locking workers within a compound and conducting daily nucleic acid testing. 

Bloomberg News reported Tuesday that a government notice told companies to reduce unnecessary interaction between non-manufacturing staff and factory floors to curb infection.

Health officials had earlier said all cases found in Shenzhen from July 15 were infected with the highly contagious Omicron subvariant BA.2.

While it is expensive and reduces the scale of production, manufacturers — including Tesla’s site south of Shanghai in the past — have opted to operate in a closed-loop instead of resorting to full shutdown during local Covid flareups.

Strict virus controls have threatened global supply chains and cooled China’s economy with Q2 growth coming in at a dismal 0.4 percent — the weakest growth since the pandemic started.

China reported 976 covid cases Tuesday, with the biggest outbreaks reported in the southern Guanxi region and Gansu province in the northwest. 

Higher prices for soda helped Coca-Cola score better-than-expected quarterly profits in spite of higher operating costs and the drag of the strong US dollar in international markets, the company announced Tuesday.

The soft drink brand benefited from a 12 percent increase in global pricing, with the biggest price increases in Europe/Middle East Africa, Latin America and North America.

An exception was Asia Pacific, where the company flagged China’s Covid-19 lockdowns as a weak area in spite of higher sales in India and the Philippines. 

Coca-Cola executives have said they are monitoring the response to higher prices. When the company last reported results in April, executives said they had yet to see a meaningful pullback from consumers to the price changes made to that point.

Results also were boosted by resurgent sales in away-from-home venues such as entertainment and professional sports locales. 

But the beverage giant pointed to a drag from higher operating costs and marketing spending compared to the prior year. The strong US dollar also dented revenues in overseas markets.

Net income fell to $1.9 billion, a 28 percent decline from the same period of last year, in part due to strong sales in the current quarter from goods with lower profit margins. 

Revenues rose 12 percent to $11.3 billion.

“Our results this quarter reflect the agility of our business, the strength of our streamlined portfolio of brands, and the actions we’ve taken to execute for growth in the face of challenges in the operating and macroeconomic environment,” said Chief Executive James Quincey.

Coca-Cola shares climbed 1.1 percent to $62.87 in pre-market trading.