Aurelia Butler

BRUSSELS/DUESSELDORF (Reuters) – The European Union’s executive outlined plans on Wednesday for raising more than 140 billion euros ($140 billion) to cope with an energy crisis that has increased the prospect of winter fuel rationing, corporate insolvencies and economic recession.European gas prices have rocketed this year as Russia has reduced fuel exports to retaliate for Western sanctions over its invasion of Ukraine, leaving households struggling to pay energy bills and utilities grappling with a liquidity crunch.European governments have responded with measures ranging from capping prices on consumer electricity and gas bills to offering credit and guarantees to prevent power providers from collapsing under the weight of collateral demands.”EU Member States have already invested billions of euros to assist vulnerable households. But we know this will not be enough,” European Commission President Ursula von der Leyen members of the European Parliament.She unveiled plans to cap revenues from those electricity generators that have gained from surging power prices but do not rely on costly gas. She also outlined plans to force fossil fuel firms to share windfall profits from energy sales.”In these times it is wrong to receive extraordinary record revenues and profits benefiting from war and on the back of our consumers,” von der Leyen said.She said the plan should raise more than 140 billion euros for the EU’s 27 members to support households and businesses.But her announcement did not include an earlier EU idea to cap Russian gas prices. That idea has divided member states, after Russia warned it could cut of all fuel supplies. Von der Leyen said the Commission was still discussing the idea.REFILLING RESERVESEurope’s benchmark gas price rose to about 208 euros per megawatt hour (MWh) on the comments, well below an August record above 343 euros but more than 200% up on a year ago.Full details of the European Commissions proposals are due to be published at about 1230 GMT. A draft of the proposals, seen by Reuters, did not include broader gas price caps.Europe has been racing to refill its storage facilities and has already met target to have them 80% full by November. But Russia’s moves to cut supplies, including via the major Nord Stream 1 pipeline to Germany, makes the winter outlook uncertain. Moscow blames sanctions for hindering pipeline maintenance. European politicians say that is a pretext.”Months of geopolitical wrangling have left the European gas market whiplashed, with volatile prices stemming from lack of supply, potential market intervention, and wider uncertainty,” Rystad analyst Zongqiang Luo said. Germany’s local utilities industry group VKU warned about possible insolvencies, after several utilities in the EU and Britain have already collapsed as they have often been unable to pass on the full impact of gas price rises to consumers because of national price cap policies.”We want to avoid insolvencies. I must warn that if individual companies are allowed to go bust, then it could become more difficult to finance the activities of all,” VKU Managing Director Ingbert Liebing told Reuters, adding the group was in talks with the German government.French grid operator RTE said there was no risk of a total winter blackout but did not rule out some power cuts at peak times, saying reducing demand was essential.’LAST RESORT’It said lowering national electricity consumption by 1% to 5% in most scenarios and up to 15% in an extreme scenario of gas shortage and very cold weather could help avert a power crunch.”As a last resort, organised, temporary and rotating load shedding outages can be activated to avoid a widespread incident,” RTE said.European regulators are examining other relief measures.”We also know that energy companies are facing severe problems with liquidity in electricity futures markets, risking the functioning of our energy system,” von der Leyen said.”We will work with market regulators to ease these problems by amending the rules on collateral – and by taking measures to limit intra-day price volatility.”Utilities often sell power in advance but must offer collateral to clearers in case of default before they supply the power. As gas prices have soared, so have collateral demands.German utility Uniper, which has already secured 13 billion euros of credit lines from the state, most of which it has already drawn, said on Wednesday it was looking for alternative routes to keep it afloat, including possibly handing a bigger stake for the government. Under an existing bailout plan, the state will take 30%.”Nationalisation is the only solution left, Uniper’s capital resources are totally under water. Mathematically speaking, there is nothing else that could be done,” a source close to the matter told Reuters.Finland’s Fortum, Uniper’s largest stakeholder, also said talks with the German government continued. The economy ministry declined to comment on the talks. More

LONDON (Reuters) – There is trouble ahead for Britain’s new finance minister Kwasi Kwarteng: a marked shift in how British assets are behaving in markets points to growing unease about the economy’s vulnerabilities.Investors around the world have typically capitalised on weakness in the pound in the past to snap up British equities and government bonds.But that has not been the case recently as the FTSE 100 share index and gilts have moved in step with sterling, unlike after the 2016 Brexit vote when the pound’s drop lured buyers, for example.GRAPHIC-UK assets have moved in sync with the pound recently… : https://fingfx.thomsonreuters.com/gfx/polling/movanebyxpa/Pasted%20image%201663143613600.pngGRAPHIC-…but they typically move inversely, like after Brexit vote: https://fingfx.thomsonreuters.com/gfx/polling/jnvwemkbwvw/Pasted%20image%201663143911264.pngThe new pattern became stark in August, the first time since 1983 that sterling fell more than 4% against the dollar and the 10-year gilt rose by as much as 50 basis points.By contrast, the inverse relationship between the euro and stocks and German government bonds has remained largely intact.While every major currency has slid against the rising dollar in recent months, the pound has declined more than most.The synchronicity across British assets suggests investors are shunning them, reflecting concerns about the economy.Britain’s heavy reliance on energy imports is likely to mean inflation – which in July hit a 40-year high of 10.1% and only eased slightly in August – will last for longer than elsewhere. For the first time on record, British fuel imports accounted for more than 20% of the value of all goods imports in July.New Prime Minister Liz Truss’s hugely expensive plan to subsidise energy bills in combination with big tax cuts to boost economic growth at a time of rising prices – and her stated desire to rip up the economic orthodoxy – are reminiscent of policies in the early 1970s that contributed to spiralling inflation.Kwarteng, appointed as chancellor of the exchequer last week, has defended the new government’s plans, saying Britain has more room to borrow than other countries that have a higher share of public debt to economic output. Kick-starting growth is the best way to get stronger tax revenues which will restore the public finances over the medium term, he says.But investors are again focusing on Britain’s core economic vulnerability: its reliance on funds from abroad to fund its balance of payments shortfall.The January-March current account deficit hit a record 8.3% of economic output although statisticians said changes to post-Brexit data collection could have skewed the figures.”The fiscal and external risks are now, in our view, a first-order concern,” Benjamin Nabarro, economist from U.S. bank Citi, said.Former Bank of England governor Mark Carney famously said Britain relied on the “kindness of strangers” to finance its current account gap, most of which stems from the trade deficit.When Carney made that comment in early 2016, foreign direct investment accounted for about half of the net financial inflows from abroad.Now, those FDI flows have turned steeply negative in net terms, leaving sales of flightier equities and bonds as Britain’s main means of financing its current account gap over the past year.GRAPHIC-Funding of UK current account deficit: https://fingfx.thomsonreuters.com/gfx/polling/egpbkrbqbvq/Pasted%20image%201663144170918.pngNabarro at Citi said the changes in the markets will not have escaped the BoE’s Monetary Policy Committee which will see declining investor confidence in British assets as an unwelcome complication in its fight against inflation and could leave interest rates higher for longer.”We suspect at least some on the committee have observed the simultaneous sell-off in sterling and gilts with no small degree of concern,” Nabarro said. “In our view, these risks should increasingly be at the centre of the UK policy discussion.”Investors await the government’s costings of its new energy bill package which Dutch bank Rabobank reckons could mean 100 billion pounds more borrowing. Others say it could be more.”That is a lot to ask,” said Stefan Koopman, senior macro strategist at Rabobank. “There is risk of a funding strike, which to some extent has already shown up in the form of a weaker currency.”Jim Leaviss, chief investment officer of public fixed income at M&G Investments, said he was underweight on gilts.”There is a concern about debt sustainability versus other countries… There is a huge wave of gilt issuance coming through and that will be an overhang on the market,” he told an M&G conference on Tuesday. A test of the appetite for gilts is likely to come next week when Britain’s Debt Management Office is expected to offer a chunk of 30-year bonds via a syndicated sale.Looking further ahead, the pound may need to fall further to attract investors.Dean Turner, an economist at UBS Wealth Management said the potentially unlimited liability of support for gas bills was weighing on investors. “Until we get some clarity on that, I just can’t see the situation turning around,” he said.Kwarteng is expected to deliver a fiscal statement to parliament next week which could include those funding details.Not everyone is avoiding British assets. Morgan Stanley (NYSE:MS) on Friday said long-dated gilts pose a buying opportunity relative to German bunds as a lot of Britain’s worrying fiscal news is already priced in.But many investors remain concerned.”It is hard to avoid the conclusion that a UK sovereign risk premium has been going into the pound – presumably on doubts about at what price investors would be prepared to fund future UK borrowing plans,” said ING rates strategist Antoine Bouvet. More

(Reuters) – The White House released new details on Wednesday on how it plans to invest more than $2 billion in the U.S. biotechnology sector as it hosts a meeting of government leaders to discuss the emerging industry.President Joe Biden on Monday signed an executive order that launched a national biotechnology and bio-manufacturing initiative, and on Wednesday the White House will hold a summit with top government officials and department heads to discuss plans on how to administer the order and allocate the money.The executive order allows the federal government to direct funding for the use of microbes and other biologically derived resources to make new foods, fertilizers and seeds, as well as making mining operations more efficient, administration officials said. It also will help fund a quest for medical breakthroughs, such as a vaccine to prevent cancer, or a blood test that could detect cancer in an annual physical.The spending plan released by the White House includes $1 billion from the Department of Defense to fund bio-industrial domestic manufacturing infrastructure over five years to boost the industry and make it accessible to U.S. innovators. Other spending includes a $250 million grant program administered by the Department of Agriculture to support sustainable American fertilizer production. A further $40 million will be used to expand the role of bio-manufacturing for active pharmaceutical ingredients, antibiotics and key materials needed to produce medications and respond to pandemics.The federal government is already a source of funds to biotechnology research and development through the National Institute of Health, the DoA and other agencies. Overall U.S. funding for R&D has dropped as a percentage of gross domestic product since a peak in the 1950s, a trend Biden has pledged to reverse. More

July’s increase represented a sharp jump from June’s 7.8% rise in prices which was a sharp slowdown from May.A Reuters poll published last month showed the surge in British house prices is expected to end next year as the cost-of-living crisis and rising interest rates put the brakes on the market.(This story refiles to add dropped word ‘high’ in the headline) More

Macau, a special administrative region of China, is the only place in the country where citizens can legally gamble in casinos. The government is expected to review the proposals and negotiate with the bidders on detailed terms and conditions, before announcing six winners by the end of November or early December, analysts said.Sands China (OTC:SCHYY), Wynn Macau (OTC:WYNMF), Galaxy Entertainment, MGM China (OTC:MCHVY), SJM Holdings (OTC:SJMHF), Melco Resorts and GMM Limited — submitted bids for the tender, the government statement said.GMM is linked to Malaysian tourism and gambling conglomerate Genting Group, which currently does not have a license in Macau.DS Kim, an analyst at JP Morgan in Hong Kong, said the current environment made it challenging for new entrants.”Time will tell,” he said, as it was hard for new entrants to make proper returns during the concession period, which has been shortened to 10 years from 20.The bidding committee will conduct the bid opening process on Sept. 16, the government said. Macau for the first time imposed a formal table cap and minimum income requirements for the new operators, set to begin their contracts at the start of 2023. The move is part of a broader overhaul of legislation for Macau’s gambling industry and gives authorities much tighter oversight and control over the casino operators, which raked in $36 billion in 2019, prior to COVID-19.The government kicked off the highly anticipated bidding process in July, when it said global gaming operators could submit bids for new licenses from July 29 until Sept. 14. [L4N2Z91XY]The bidding process took place amid Macau’s worst outbreak of COVID-19, which led to a 12-day closure of casinos in July. While casinos in the Chinese special administrative region have re-opened, there is little business, as restrictions are only being lifted slowly. More