US Business

Equities rose Tuesday in Asia as some stability returned to markets after last week’s upheaval, but analysts warned of further pain for traders after central bank officials hinted at further interest rate hikes to reel in inflation.

While there was no catalyst from Wall Street owing to a public holiday, a healthy performance across Europe provided a little boost, while bargain-buying was also lending support.

However, there remains an overarching sense of gloom as traders speculate that the sharp lift in borrowing costs around the world will tip economies into recession.

Focus this week is on Federal Reserve boss Jerome Powell’s two days of testimony to lawmakers in Washington, which will be closely watched for some insight into the bank’s thinking and possible clues about its plans for fighting surging prices.

The Fed announced a three-quarter point lift last week, after inflation data days earlier had smashed forecasts and hit a four-decade high.

“While (investors do) not expect Powell to reinvent the policy wheel, we could expect him to reinforce the idea that the Fed is in data-dependent mode,” said Stephen Innes of SPI Asset Management. 

“Hence, any shift in Fed rhetoric will be a function of incoming data, virtually all of which now presents event risk. From that perspective, further evidence of persistent inflation will trigger policy panic, while any signs of sluggish growth momentum will confirm the recession narrative.

“Neither suggests that now is the time to board the rally wagon.”

In early trade, Tokyo, Hong Kong, Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta all rose.

“There might be a narrative that we’ve hit a bottom, we are oversold, the Fed is taking inflation seriously and that might be slightly bullish in the interim,” Frances Stacy, of Optimal Capital, told Bloomberg TV.

However, while the volatility of last week has gone, banks’ intention to continue hiking rates could cause fresh ructions.

Several officials — including at the Fed, Bank of England, Reserve Bank of Australia and European Central Bank — have come out in recent days to flag a further tightening of borrowing costs.

In commodities markets, oil extended gains as traders moved back in after Friday’s plunge fuelled by concerns over a possible recession.

The gains have been helped by optimism for a boost to demand as China gradually eases out of its period of Covid containment, while the US summer driving period picks up.

– Key figures at around 0230 GMT –

Tokyo – Nikkei 225: UP 1.8 percent at 26,225.15 (break)

Hong Kong – Hang Seng Index: UP 1.1 percent at 21,392.60

Shanghai – Composite: UP 0.1 percent at 3,319.07

Euro/dollar: UP at $1.0534 from $1.0528 Monday

Pound/dollar: UP at $1.2269 from $1.2243

Euro/pound: DOWN at 85.86 pence from 86.02 pence

Dollar/yen: UP at 135.10 yen from 135.06 yen

West Texas Intermediate: UP 2.2 percent at $112.012

Brent North Sea crude: UP 1.6 percent at $115.91 per barrel

London – FTSE 100: UP 1.5 percent at 7,121.81 points (close)

New York – Dow: DOWN 0.1 percent at 29,888.78 (close)

Thousands of Indigenous people and members of other disgruntled groups marched into Ecuador’s capital on the eighth day of fuel price protests Monday, accused by the president of seeking only “chaos” and his removal.

President Guillermo Lasso extended a state of emergency to cover six provinces, with a nighttime curfew in Quito, as he seeks to curtail demonstrations that have seen roads barricaded countrywide, cost the economy tens of millions of dollars, and left dozens of people injured.

“With this decision, the welfare of citizens is safeguarded in the face of violence. At the same time, the rights of those who demonstrate peacefully are protected,” the government said.

On foot, on motorcycles and in crowded trucks, the Indigenous protesters began a peaceful march towards the city center from Cutuglagua, an area in southern Quito where they have been steadily growing in number since Sunday.

A hundred Indigenous people also entered the city from the north.

The powerful Confederation of Indigenous Nationalities of Ecuador (Conaie) — credited with helping topple three presidents between 1997 and 2005 — called the protest as Ecuadorans increasingly struggle to make ends meet.

Indigenous people comprise more than a million of Ecuador’s 17.7 million inhabitants, and their protest has since been joined by students, workers and others feeling the economic pinch.

“We have reached out, we have called for dialogue, but they do not want peace,” Lasso said in a video on Twitter Monday.

“They seek chaos. They want to eject the president.”

Police say 63 personnel have been wounded in clashes and 21 others briefly held hostage since the protests began, while human rights observers reported 79 arrests and 55 civilians wounded.

– ‘Zone of peace’ –

A state of emergency declared last Friday allowed Lasso to mobilize the armed forces to maintain order, suspend certain civil rights and declare curfews.

On Sunday, Ecuadoran police requisitioned an Indigenous cultural center in Quito to use as a base for protest monitoring.

The center had sheltered thousands of Indigenous people during anti-government demonstrations in 2019 that left 11 dead and more than 1,000 injured but forced then-president Lenin Moreno to abandon plans to eliminate fuel subsidies.

The Salesian University, in the north of the capital, decided on Monday to “open the doors” of its facilities as a “zone of peace and humanitarian shelter” for the indigenous people and called “to stop actions and attitudes that interfere or alter the processes of dialogue and the search for solutions.”

Oil producer Ecuador has been hit by rising inflation, unemployment and poverty exacerbated by the coronavirus pandemic.

Fuel prices have risen sharply since 2020, almost doubling for diesel from $1 to $1.90 per gallon and rising from $1.75 to $2.55 for gasoline.

Conaie demands a price cut to $1.50 a gallon for diesel and $2.10 for gasoline.

It also wants food price controls and a commitment to renegotiating the personal bank loans of about four million families.

Global air transport is on course to return to profit after two pandemic-battered years but the war in Ukraine and the cost-of-living crisis lurk as threats, the industry’s world body said on Monday.

Renewed profitability “appears within reach” in 2023, the International Air Transport Association said, predicting a rebound in passenger levels to 83 percent of pre-pandemic levels this year.

Industry losses are expected to drop to $9.7 billion in 2022, a “huge improvement” from $137.7 billion in 2020 and $42.1 billion in 2021, IATA said in an upgraded industry outlook at its annual general meeting in Doha.

“Airlines are resilient. People are flying in ever greater numbers. And cargo is performing well against a backdrop of growing economic uncertainty,” IATA director general Willie Walsh said.

The air industry was sent reeling by the pandemic, with passenger numbers plunging 60 percent in 2020 and remaining 50 percent down in 2021. Airlines lost nearly $200 billion over two years.

While some firms in the sector went bankrupt, others — often those backed by states — have emerged with profits intact.

IATA said there were positive signs in the latest figures, with North American carriers expected to return an $8.8 billion profit this year.

More than 1,200 aircraft are expected to be delivered in 2022, while cargo volumes should reach a record 68.4 million tonnes “despite economic challenges”, it added.

“Strong pent-up demand, the lifting of travel restrictions in most markets, low unemployment in most countries, and expanded personal savings are fuelling a resurgence in demand that will see passenger numbers reach 83 percent of pre-pandemic levels in 2022,” IATA said.

– Clouds on the horizon –

Turnover should reach 93 percent of 2019 levels this year or $782 billion, a rebound of 54.5 percent on 2021, as revenues from passenger flights more than double to $498 billion.

Cargo, a rare bright spot for air transport in the depths of the pandemic, will retreat slightly with revenues of $191 billion — still double the level of 2019.

Clouds remain on the horizon, however, especially the war in Ukraine after the closure of Russian airspace to several long-haul carriers forced them into costly detours.

Airlines, desperate to put the coronavirus pandemic behind them, are facing a potential summer of chaos with shortages and strikes that could threaten their recovery.

In the past few weeks, delays and cancellations caused by a lack of staff at airports and strikes for better pay have wreaked havoc upon travellers.

The problems originate with the pandemic when airlines and airports laid off thousands of workers during its worst-ever crisis. Now, they are scrambling for employees.

However, Walsh played down the difficulties, saying they weren’t widespread and should ease in time.

High inflation will also erode the purchasing power of consumers, although airlines could profit from rising prices and interest rates as their debts are locked in at lower levels.

Meanwhile, the industry remains wary of new coronavirus variations that could close borders once again. 

China is still bound up with restrictions that are depressing the world’s second-biggest domestic market and are creating “chaos” in global logistics, said IATA’s chief economist Marie Owens Thomsen.

IATA originally planned to hold its annual general meeting in Shanghai, but moved it to Qatar as China, pursuing its “zero-Covid” policy, continues to grapple with the pandemic.

The Dutch joined Germany and Austria in reverting to coal power on Monday following an energy crisis provoked by Russia’s invasion of Ukraine.

The Netherlands said it would lift all restrictions on power stations fired by the fossil fuel, which were previously limited to just over a third of output.

Berlin and Vienna made similar announcements on Sunday as Moscow, facing biting sanctions over Ukraine, cuts gas supplies to energy-starved Europe.

“The cabinet has decided to immediately withdraw the restriction on production for coal-fired power stations from 2002 to 2024,” Dutch climate and energy minister Rob Jetten told journalists in The Hague.

The Dutch minister said his country had “prepared this decision with our European colleagues over the past few days”.

Germany however said it still aimed to close its coal power plants by 2030, in light of the greater emissions of climate-changing CO2 from the fossil fuel.

“The 2030 coal exit date is not in doubt at all,” economy ministry spokesman Stephan Gabriel Haufe said at a regular news conference.

The target was “more important than ever”, he added.

– ‘More countries being squeezed’ –

Russia’s invasion of its pro-Western neighbour has sent global prices for energy soaring and raised the prospect of shortages if supplies were to be cut off. 

Russian energy giant Gazprom has already stopped deliveries to a number of European countries, including Poland, Bulgaria, Finland and the Netherlands.

Germany’s reliance on Russian energy imports has made it particularly vulnerable as Moscow looks for leverage against the West.

The Dutch are less reliant, depending on Russia for around 15 percent of their gas supplies compared to the EU average of 40 percent. But they are still concerned.

“I want to emphasise that at the moment there’s no acute gas shortage,” Dutch minister Jetten said. “However, more countries are now being squeezed (by Russia). That worries us.” 

The Dutch government said it was also making an “urgent appeal” to companies and business to save as much energy as possible ahead of the winter.

Germany’s decision to power up its coal power plants came after Gazprom cut deliveries to Germany via the Nord Stream gas pipeline last week.

The move, presented by Gazprom as a technical issue, has been criticised as “political” by Berlin. 

German Economy Minister Robert Habeck, a Green party politician, described the decision to revert to coal as “bitter, but indispensable for reducing gas consumption”.

– ‘Unexpected situation’ –

Austria’s government meanwhile announced Sunday that it would reopen a mothballed coal power station because of power shortages arising from reduced deliveries of gas from Russia.

The authorities would work with the Verbund group, the country’s main electricity supplier, to get the station in the southern city of Mellach back in action, said the Chancellery.

The European Commission noted Monday that “some of the existing coal capacities might be used longer than initially expected” because of the new energy landscape in Europe.   

“We know that the energy mix and the plans of member states will adjust slightly because we are in an unexpected situation,” Commission spokesman Tim McPhie said at a press briefing. 

Germany, Europe’s largest economy, has managed to reduce the share of its natural gas supplied by Russia from 55 percent before the invasion to 35 percent.

The government has also mandated the filling of gas reserves to 90 percent ahead of the European winter at the end of the year, to hedge against a further reduction in supply.

Germany’s government, a coalition between the Social Democrats, Liberals and Greens, aims “ideally” to close all coal power plants by 2030.

Their agreement, reached at the end of last year, brought forward the previous government’s aim to shut the plants by 2038.

burs-dk/jhe/jj

The Dutch joined Germany and Austria in reverting to coal power on Monday following an energy crisis provoked by Russia’s invasion of Ukraine.

The Netherlands said it would lift all restrictions on power stations fired by the fossil fuel, which were previously limited to just over a third of output.

Berlin and Vienna made similar announcements on Sunday as Moscow, facing biting sanctions over Ukraine, cuts gas supplies to energy-starved Europe.

“The cabinet has decided to immediately withdraw the restriction on production for coal-fired power stations from 2002 to 2024,” Dutch climate and energy minister Rob Jetten told journalists in The Hague.

The Dutch minister said his country had “prepared this decision with our European colleagues over the past few days”.

Germany however said it still aimed to close its coal power plants by 2030, in light of the greater emissions of climate-changing CO2 from the fossil fuel.

“The 2030 coal exit date is not in doubt at all,” economy ministry spokesman Stephan Gabriel Haufe said at a regular news conference.

The target was “more important than ever”, he added.

– ‘More countries being squeezed’ –

Russia’s invasion of its pro-Western neighbour has sent global prices for energy soaring and raised the prospect of shortages if supplies were to be cut off. 

Russian energy giant Gazprom has already stopped deliveries to a number of European countries, including Poland, Bulgaria, Finland and the Netherlands.

Germany’s reliance on Russian energy imports has made it particularly vulnerable as Moscow looks for leverage against the West.

The Dutch are less reliant, depending on Russia for around 15 percent of their gas supplies compared to the EU average of 40 percent. But they are still concerned.

“I want to emphasise that at the moment there’s no acute gas shortage,” Dutch minister Jetten said. “However, more countries are now being squeezed (by Russia). That worries us.” 

The Dutch government said it was also making an “urgent appeal” to companies and business to save as much energy as possible ahead of the winter.

Germany’s decision to power up its coal power plants came after Gazprom cut deliveries to Germany via the Nord Stream gas pipeline last week.

The move, presented by Gazprom as a technical issue, has been criticised as “political” by Berlin. 

German Economy Minister Robert Habeck, a Green party politician, described the decision to revert to coal as “bitter, but indispensable for reducing gas consumption”.

– ‘Unexpected situation’ –

Austria’s government meanwhile announced Sunday that it would reopen a mothballed coal power station because of power shortages arising from reduced deliveries of gas from Russia.

The authorities would work with the Verbund group, the country’s main electricity supplier, to get the station in the southern city of Mellach back in action, said the Chancellery.

The European Commission noted Monday that “some of the existing coal capacities might be used longer than initially expected” because of the new energy landscape in Europe.   

“We know that the energy mix and the plans of member states will adjust slightly because we are in an unexpected situation,” Commission spokesman Tim McPhie said at a press briefing. 

Germany, Europe’s largest economy, has managed to reduce the share of its natural gas supplied by Russia from 55 percent before the invasion to 35 percent.

The government has also mandated the filling of gas reserves to 90 percent ahead of the European winter at the end of the year, to hedge against a further reduction in supply.

Germany’s government, a coalition between the Social Democrats, Liberals and Greens, aims “ideally” to close all coal power plants by 2030.

Their agreement, reached at the end of last year, brought forward the previous government’s aim to shut the plants by 2038.

burs-dk/jhe/jj