US Business

Global stocks fell Wednesday and the euro dipped below $1.00 for the first time in nearly 20 years after data showed a surge in US inflation last month, convincing investors that further increases in borrowing costs are on their way. 

Stock prices on Wall Street fell at the open after a pick-up in US inflation to 9.1 percent in June increased the risk of a possible recession.

European stock markets were also sharply lower by mid-afternoon, with London’s blue-chip FTSE-100 index down 0.7 percent, Frankfurt’s DAX down 1.4 percent and Paris’s CAC-40 down 1.1 percent. 

The euro fell below the symbolic level of $1.00 for the first time since December 2002, dipping as low as $.0998, as the prospect of higher interest rates rendered the dollar more attractive to investors.

The economic prospects for the 19-country eurozone are also darkening as a possible halt to Russian gas supplies increases the risk of recession. 

– Inflation tops 9% – 

US inflation surged to a 40-year high in June on a 12-month basis, much worse than expected, US Labor Department data showed.

“The inflation reading has blown past all expectations today and there is no doubt now that the (Federal Reserve) will be even more aggressive,” said Naeem Aslam, analyst at Avatrade.

“Inflation at 9.1 pecent makes you sick as a consumer and as a central banker.” 

Markets fear the reading will prompt the Fed to keep hiking interest rates aggressively after it ramped up borrowing costs by three-quarters of a percentage point last month.

Consumer prices are soaring worldwide after economies reopened from pandemic lockdowns and as the Ukraine war keeps energy prices elevated.

In a further sign of the pressure being felt around the world, the New Zealand and South Korean central banks each lifted interest rates by 0.5 percentage points Wednesday.

It was the steepest increase by Seoul since 1999.

– Europe gas crisis –

The euro briefly fell below parity to the dollar as a worsening energy crisis fans expectations for a recession in the single currency area. But the unit quickly moved back above the $1.00 mark.

With Russian energy giant Gazprom starting 10 days of maintenance Monday on its Nord Stream 1 pipeline, the bloc — and particularly gas-reliant Germany — is waiting nervously to see if the taps are turned back on.

The single currency has been hit also by the European Central Bank’s reluctance to raise rates — in contrast to monetary policy elsewhere.

“A prolonged cut to the gas supply would halt a lot of economic activity, sending (Germany) deep into recession,” said Tapas Strickland at National Australia Bank.

He said July 21 — when the gas should be switched back on — will be a crucial date.

“That date also happens to be the day of the next ECB meeting,” Strickland added. 

“Either of these events are key risk events. Russia playing gas politics by not switching on the gas supply would likely see the euro lurch much lower.”

– Key figures at around 1345 GMT –

New York – Dow: DOWN 0.8 percent at 30,737.57 points

London – FTSE 100: DOWN 0.7 percent at 7,159.99

Frankfurt – DAX: DOWN 1.4 percent at 12,728.88

Paris – CAC 40: DOWN 1.1 percent at 5,978.65

EURO STOXX 50: DOWN 1.3 percent at 3,441.67

Tokyo – Nikkei 225: UP 0.5 percent at 26,478.77 (close)

Hong Kong – Hang Seng Index: DOWN 0.2 percent at 20,797.95 (close)

Shanghai – Composite: UP 0.1 percent at 3,284.29 (close)

Euro/dollar: DOWN at $1.0024 from $1.0037 Tuesday

Pound/dollar: UP at $1.1873 from $1.1889 

Euro/pound: UP at 84.42 pence from 84.40 pence

Dollar/yen: UP at 137.55 yen from 136.84 yen

West Texas Intermediate: UP 0.7 percent at $96.54 per barrel

Brent North Sea crude: UP 0.2 percent at $99.71 per barrel

burs-spm/cdw

A Tokyo court Wednesday ordered former executives from the operator of the devastated Fukushima nuclear plant to pay 13.32 trillion yen ($97 billion) for failing to prevent the disaster, plaintiffs said.

Four ex-bosses from the Tokyo Electric Power Company (TEPCO) were ordered to pay the damages in a suit brought by shareholders over the nuclear disaster triggered by a massive tsunami in 2011.

Plaintiffs emerged from the Tokyo court holding banners reading “shareholders win” and “responsibility recognised”.

Lawyers for the plaintiffs hailed the ruling, and said they believed it to be the largest amount of compensation ever awarded in a civil lawsuit in Japan.

“Nuclear power plants can cause irreparable damage to human lives and the environment,” the plaintiffs said in a separate statement after the ruling.

“Executives for firms that operate such nuclear plants bear enormous responsibility, which cannot compare with that of other companies.”

The shareholders argued that the disaster could have been prevented if TEPCO bosses had listened to research and carried out preventative measures like placing an emergency power source on higher ground.

Defendants said the studies they were not credible and the risks unpredictable.

But the court ruled nuclear plant operators have “an obligation to prevent severe accidents based on the latest scientific and expert engineering knowledge”, and the executives failed to heed credible warnings.

– ‘Historic’ –

In a statement read to AFP by a TEPCO spokesman, the firm declined to comment on the ruling, saying only: “We again express our heartfelt apology to people in Fukushima and members of society broadly for causing trouble and worry” with the disaster.

The damages are intended to cover the costs to TEPCO for dismantling the reactors, compensating affected residents, and cleaning up contamination.

The lawsuit is designed so the money will go to TEPCO itself, which the plaintiffs own partially as shareholders.

Hiroyuki Kawai, a lawyer representing the plaintiffs, called the decision “historic”.

“We realise that 13 trillion yen is well beyond their capacity to pay,” he told reporters, adding that the plaintiffs expect the men to pay as much as their assets allow.

There was no immediate word on whether the executives would appeal, though the plantiffs’ legal team insisted “if they have heart to feel regret… they should deeply apologise to residents and follow the judgement without appealing”.

The size of the award is enormous. 

As a point of comparison, in 2015 British oil giant BP was ordered to pay $20.8 billion for the Gulf of Mexico oil spill in what was described at the time as the highest fine ever imposed on a company in US history. 

– ‘Retirement years in misery’ –

Three of the Fukushima Daiichi nuclear plant’s six reactors were operating when a massive undersea quake triggered a devastating tsunami on March 11, 2011.

They went into meltdown after their cooling systems failed when waves flooded backup generators, leading to the worst nuclear disaster since Chernobyl.

Around 12 percent of the Fukushima region was once declared unsafe but no-go zones now cover around two percent, although populations in many towns remain far lower than before.

TEPCO has been pursued in the courts by survivors of the disaster as well as shareholders, and six plaintiffs this year took the firm to court over claims they developed thyroid cancer because of radiation exposure.

In 2019, a court acquitted three former TEPCO officials in the only criminal trial to stem from the disaster. 

They were among the four men ordered to pay damages in Wednesday’s ruling: former chairman Tsunehisa Katsumata, former vice presidents Sakae Muto and Ichiro Takekuro and former president Masataka Shimizu.

The men had faced up to five years in prison if convicted of professional negligence resulting in death and injury, but that court ruled that they could not have predicted the scale of the tsunami that triggered the disaster.

Kawai said when the shareholder suit was filed in 2012 that senior managers at TEPCO must be made to pay.

“You may have to sell your house. You may have to spend your retirement years in misery,” he said then.

“In Japan, nothing can be resolved and no progress can be made without assigning personal responsibility.”

TEPCO is currently engaged in a decades-long effort to decommission the plant, a costly and difficult process.

No one was killed in the nuclear meltdown, but the tsunami left 18,500 dead or missing.

European equities fell Wednesday with traders on edge before key June inflation data in the United States.

The London stock market sank by nearly one percent, around half-way through the session, despite news of rebounding UK economic growth in May.

Eurozone stocks were down by about one percent after a mixed close in Asia.

The euro clawed back slightly, one day after hitting dollar parity for the first time in two decades on concerns about a possible recession in the eurozone.

Oil rebounded slightly having fallen sharply Tuesday on weaker demand expectations.

– Tenterhooks –

“Markets are on tenterhooks ahead of the US inflation data which will hold great sway over the Fed’s rate-hike plans,” said Exinity Markets analyst Han Tan.

“A fresh four-decade high, along with more signs of unabating inflationary pressures, may well force the Fed to punch harder and faster in its battle against runaway consumer prices.”

Markets fear more evidence of red hot US inflation will prompt the Fed to keep hiking interest rates aggressively after it ramped up borrowing costs by three-quarters of a percentage point last month.

US inflation had spiked to a four-decade high of 8.6 percent in May.

Inflation is soaring worldwide after economies reopened from pandemic lockdowns and as the Ukraine war keeps energy prices elevated.

In a further sign of the pressure being felt around the world, the New Zealand and South Korean central banks each lifted interest rates by 0.5 percentage points Wednesday.

It was the steepest increase by Seoul since 1999.

– Europe gas crisis –

The euro held above $1 a day after hitting parity for the first time since late 2002, as a worsening energy crisis fanned expectations that the eurozone would plunge into recession.

With Russian energy giant Gazprom starting 10 days of maintenance Monday on its Nord Stream 1 pipeline, the bloc — and particularly gas-reliant Germany — is waiting nervously to see if the taps are turned back on.

The single currency has been hit also by the European Central Bank’s reluctance to raise rates — in contrast to monetary policy elsewhere.

“A prolonged cut to the gas supply would halt a lot of economic activity, sending (Germany) deep into recession,” said Tapas Strickland at National Australia Bank.

He said July 21 — when the gas should be switched back on — will be a crucial date.

“That date also happens to be the day of the next ECB meeting,” Strickland added. 

“Either of these events are key risk events. Russia playing gas politics by not switching on the gas supply would likely see the euro lurch much lower.”

– Key figures at around 1130 GMT –

London – FTSE 100: DOWN 0.8 percent at 7,149.84 points

Frankfurt – DAX: DOWN 1.0 percent at 12,770.74

Paris – CAC 40: DOWN 0.9 percent at 5,989.00

EURO STOXX 50: DOWN 1.0 percent at 3,451.61

Tokyo – Nikkei 225: UP 0.5 percent at 26,478.77 (close)

Hong Kong – Hang Seng Index: DOWN 0.2 percent at 20,797.95 (close)

Shanghai – Composite: UP 0.1 percent at 3,284.29 (close)

New York – Dow: DOWN 0.6 percent at 30,981.33 (close)

Euro/dollar: UP at $1.0055 from $1.0037 Tuesday

Pound/dollar: UP at $1.1919 from $1.1889 

Euro/pound: DOWN at 84.37 pence from 84.40 pence

Dollar/yen: UP at 137.08 yen from 136.84 yen

West Texas Intermediate: UP 1.0 percent at $96.84 per barrel

Brent North Sea crude: UP 0.6 percent at $100.05 per barrel

A Tokyo court Wednesday ordered former executives from the operator of the devastated Fukushima nuclear plant to pay 13.32 trillion yen ($97 billion) for failing to prevent the disaster, plaintiffs said.

Four ex-bosses from the Tokyo Electric Power Company (TEPCO) were ordered to pay the damages in a suit brought by shareholders over the nuclear disaster triggered by a massive tsunami in 2011.

Plaintiffs emerged from the Tokyo court holding banners reading “shareholders win” and “responsibility recognised”.

Lawyers for the plaintiffs hailed the ruling, and said they believed it to be the largest amount of compensation ever awarded in a civil lawsuit in Japan.

“Nuclear power plants can cause irreparable damage to human lives and the environment,” the plaintiffs said in a separate statement after the ruling.

“Executives for firms that operate such nuclear plants bear enormous responsibility, which cannot compare with that of other companies.”

The shareholders argued that the disaster could have been prevented if TEPCO bosses had listened to research and carried out preventative measures like placing an emergency power source on higher ground.

Defendants said the studies they were not credible and the risks unpredictable.

But the court ruled nuclear plant operators have “an obligation to prevent severe accidents based on the latest scientific and expert engineering knowledge,” and the executives failed to heed credible warnings.

In a statement read to AFP by a TEPCO spokesman, the firm declined to comment on the ruling, saying only: “We again express our heartfelt apology to people in Fukushima and members of society broadly for causing trouble and worry” with the disaster.

The damages are intended to cover the costs to TEPCO for dismantling the reactors, compensating affected residents, and cleaning up contamination.

The lawsuit is designed so the money will go to TEPCO itself, which the plaintiffs own partially as shareholders.

Hiroyuki Kawai, a lawyer representing the plaintiffs, called the decision “historic”.

“We realise that 13 trillion yen is well beyond their capacity to pay,” he told reporters, adding that the plaintiffs expect the men to pay as much as their assets allow.

There was no immediate word on whether the executives would appeal, though the plantiffs’ legal team insisted “if they have heart to feel regret… they should deeply apologise to residents and follow the judgement without appealing.”

– ‘Retirement years in misery’ –

Three of the Fukushima Daiichi nuclear plant’s six reactors were operating when a massive undersea quake triggered a devastating tsunami on March 11, 2011.

They went into meltdown after their cooling systems failed when waves flooded backup generators, leading to the worst nuclear disaster since Chernobyl.

Around 12 percent of the Fukushima region was once declared unsafe but no-go zones now cover around two percent, although populations in many towns remain far lower than before.

TEPCO has been pursued in the courts by survivors of the disaster as well as shareholders, and six plaintiffs this year took the firm to court over claims they developed thyroid cancer because of radiation exposure.

In 2019, a court acquitted three former TEPCO officials in the only criminal trial to stem from the disaster. 

They were among the four men ordered to pay damages in Wednesday’s ruling: former chairman Tsunehisa Katsumata, former vice presidents Sakae Muto and Ichiro Takekuro and former president Masataka Shimizu.

The men had faced up to five years in prison if convicted of professional negligence resulting in death and injury, but that court ruled that they could not have predicted the scale of the tsunami that triggered the disaster.

Kawai said when the shareholder suit was filed in 2012 that senior managers at TEPCO must be made to pay.

“You may have to sell your house. You may have to spend your retirement years in misery,” he said then.

“In Japan, nothing can be resolved and no progress can be made without assigning personal responsibility.”

TEPCO is currently engaged in a decades-long effort to decommission the plant, a costly and difficult process.

No one was killed in the nuclear meltdown, but the tsunami left 18,500 dead or missing.

High oil prices have yet to dampen demand which is set to continue rising and may soon outstrip supply, the International Energy Agency warned Wednesday.

It cautioned that the global economic recovery could be derailed unless governments take measures to reduce consumption and fuel prices that pose a threat to stability in some nations.

“Without strong policy intervention on energy use, risks remain high that the world economy falls off-track for recovery,” the Paris-based agency that advises industrialised nations on energy policy said in its latest monthly report on oil markets.

Oil prices have surged from around $80 per barrel earlier this year to over $120 at times as Russia’s invasion of Ukraine has sparked supply concerns and the reopening of China’s economy from Covid lockdowns has boosted demand.

If high petrol prices have started to dent demand in industrialised nations, the IEA said this has been counterbalanced by larger-than-expected rebounds in demand by China and some emerging and developing nations.

The IEA now expects oil demand to rise this year to 99.2 million barrels per day (mbd) and to 101.3 mbd next year.

Meanwhile, supply climbs to 100.1 mbd this year. But even if it hits an expected record of 101.1 mbd next year, it will fall below demand.

The IEA noted that the world has little spare capacity to increase production, with the combined buffer of Saudi Arabia and the United Arab Emirates set to fall to just 2.2 mbd in August.

It said the production of OPEC+ nations could even fall next year if Russia’s supply is impacted as expected by tightening international sanctions.

Coupled with tight refinery margins causing imbalances in certain product markets and putting upward pressure on prices, “it may be up to demand side measures to bring down consumption and fuel costs that pose a threat to stability, most notably in emerging markets,” the IEA said.

It added the strengthening of the dollar versus other currencies as the US Federal Reserve hikes interest rates has compounded the pain of already rising import costs for food and oil for numerous developing and emerging nations, including Sri Lanka which has been gripped by social unrest.

Asian stockswere mixed Wednesday as trader struggled to recover some of the losses suffered at the start of the week, while oil bounced from a rout, though recession alarms continue to ring loud.

The euro clawed its way back slightly after hitting parity with the dollar for the first time in two decades, though it remains under pressure from growing concerns about an energy crisis across the eurozone and the European Central Bank’s slower pace of monetary tightening.

Traders are also awaiting the release of a series of key indicators this week, including the all-important consumer price index later Wednesday, with expectations for another increase to a fresh 41-year high.

Another big spike in prices will reinforce the Federal Reserve’s determination to lift interest rates 75 basis points for a second successive month in July, adding to concerns that officials could go too far and tip the economy into recession.

Still, Lauren Goodwin of New York Life Investments said policymakers were unlikely to shift from their hawkish tilt for now.

“This is widely expected to be a really strong print,” she told Bloomberg Television.

“Even if it is not, I don’t think that changes the Fed’s perspective in a couple of weeks. We won’t have enough evidence that inflation is convincingly turning over.”

In a further sign of the pressure being felt around the world from surging prices, the New Zealand and South Korean central banks each lifted rates 0.5 percentage points Wednesday, the first such increase by Seoul since 1999. 

After losses on Wall Street, Asian equities were mixed. Shanghai edged up after data showed a forecast-beating jump in Chinese exports, while there were also gains in Tokyo, Sydney, Seoul, Wellington and Taipei.

However, Hong Kong was unable to hold earlier gains, while Singapore, Manila and Jakarta and Mumbai were in the red.

London fell despite data showing the UK economy unexpectedly saw growth last month. Paris and Frankfurt also fell. 

– Europe gas crisis –

Stephen Innes at SPI Asset Management said equities could continue to struggle owing to a perfect storm of crises engulfing trading floors.

“Typically, equity markets can deal with one risk relatively well,” he said in a note. “But the current setup of sticky inflation, rapid Fed tightening, growth/recession risks and excessive rates volatility, to name a few, have at times left investors defenceless. 

“And with the market coalescing to a bearish consensus, stocks are having trouble sustaining a meaningful rally.”

Both main crude contracts rose but were and nowhere near recovering the more than seven percent drops suffered Tuesday, hit by bets on a drop in demand and fears of more Covid-19 lockdowns in Shanghai.

The commodity has lost a large chunk of the gains seen after Vladimir Putin’s invasion of Ukraine, despite bans on imports from Russia, with some analysts saying consumers were simply choosing not to buy fuel because of the high price.

Data from the American Petroleum Institute showed US stockpiles rose 4.76 million barrels last week, Bloomberg News reported citing people familiar with the figures, indicating demand slacking off even during the key summer driving season.

Joe Biden’s visit to Saudi Arabia on Friday will be followed intently as he tries to persuade the crude giant to pump more to help reduce prices.

On currency markets, the euro held just above $1.0 a day after hitting parity on Tuesday for the first time since late 2022, with a worsening energy crisis fanning expectations that the eurozone will plunge into recession.

With Russian energy giant Gazprom starting 10 days of maintenance Monday on its Nord Stream 1 pipeline, the bloc — and particularly gas-reliant Germany — is waiting nervously to see if the taps are turned back on.

“A prolonged cut to the gas supply would halt a lot of economic activity, sending (Germany) deep into recession,” said Tapas Strickland at National Australia Bank.

He said July 21 — when the gas should be switched back on — will be a crucial date.

“That date also happens to be the day of the next ECB meeting,” he added. “Either of these events are key risk events. Russia playing gas politics by not switching on the gas supply would likely see the euro lurch much lower.”

– Key figures at around 0810 GMT –

Tokyo – Nikkei 225: UP 0.5 percent at 26,478.77 (close)

Hong Kong – Hang Seng Index: DOWN 0.2 percent at 20,797.95 (close)

Shanghai – Composite: UP 0.1 percent at 3,284.29 (close)

London – FTSE 100: DOWN 0.9 percent at 7,143.57

Euro/dollar: DOWN at $1.0035 from $1.0037 Tuesday

Pound/dollar: UP at $1.1912 from $1.1889 

Euro/pound: DOWN at 84.27 pence from 84.40 pence

Dollar/yen: UP at 137.07 yen from 136.84 yen

West Texas Intermediate: UP 0.9 percent at $96.74 per barrel

Brent North Sea crude: UP 1.0 at $100.51 per barrel

New York – Dow: DOWN 0.6 percent at 30,981.33 (close)