Aurelia Butler

HOUSTON (Reuters) -Exxon Mobil Corp and Shell (LON:RDSa) Plc on Thursday confirmed the sale of their California oil joint-venture Aera to German asset manager IKAV for $4 billion, ending a 25-year-long partnership that was one of the state’s largest oil producers.The sale reflects the two companies move out of mature energy properties at a time when high oil and gas prices favor new deals. Reuters this week reported the oil giants were in advanced talks on a sale of the San Joaquin Valley property.The deal puts a company with conventional and renewable energy investments in charge of a living relic of California’s early oil and gas production. IKAV has 2.5 billion euros ($2.49 billion) under management and owns wind, solar, geothermal and oil and gas operations. It operates a Colorado natural gas business acquired two years ago from BP (NYSE:BP). The transaction is expected to close in the fourth quarter of 2022, subject to regulatory approvals. Shell faces a $300 million to $400 million impairment charge as a result of the sale, it said.IKAV buys assets with strong cash yields and holds them to maximize returns to its funds, according to its website. Last year, it built a solar plant in Italy and took a majority stake in Metaenergia, an Italian operator of gas-fired power plants. Exxon (NYSE:XOM), which owned 48% of Aera, has been divesting operations as it focus on Guyana, Brazil offshore and liquefied natural gas projects. The deal brings its closer to a target of selling $15 billion in assets. The Aera sale fits a strategy of focusing investments “in low-cost-of-supply oil and natural gas to meet consumer demand and create value for our shareholders,” said Liam Mallon, president of Exxon’s Upstream Company, in a statement. Shell Upstream Director Zoe Yujnovich said the sale follows a strategy to focus “on positions with high growth potential and a strong integrated value chain”. Aera was formed in 1997 and has operations in eight onshore fields in central California. In 2021, the company produced about 95,000 barrels of oil and gas per day, according to the statement. Both oil producers are keeping their other California operations, including gas station chains.($1 = 1.0057 euros) More

China has condemned a US move that threatens its access to high-end processors from American companies that are central to the most demanding artificial intelligence work, after Washington stepped up its efforts to restrict exports of cutting-edge technology to its trade and military rival. US officials have told chipmaker Nvidia that it will need special licences to sell Chinese customers two of its processors that are widely used to speed up AI calculations, the company said in a filing on Wednesday. The government is imposing the requirement on any products containing its A100 and forthcoming H100 graphical processing units. The processors are used as “accelerators” to speed up the most data-intensive parts of the machine learning calculations used in AI. AMD, whose GPUs are also used as accelerators for AI calculations, said it had also been told that it would need to apply for licences in order to sell its most advanced accelerator, the MI250X, in China.Thank you for reading FirstFT Asia. PS you can join board members and C-suite executives in person or online for the Cyber Resilience Summit on September 21-23 at Beau-Rivage Palace, Lausanne. Register for your pass today. — EmilyFive more stories in the news1. Taiwan shoots down suspected Chinese drone for first time The Taiwanese army said an unidentified commercial drone equipped with cameras intruded into restricted airspace over the waters around Shihyu, a Taiwan-controlled islet less than 4km from Chinese territory.2. UN inspects Russian-held nuclear plant in Ukraine The UN’s atomic safety watchdog was able to inspect the Russian-occupied Zaporizhzhia nuclear power plant in southern Ukraine on Thursday, and said it would set up a “continued” presence at the site on the frontline of Russia’s invasion of Ukraine. The inspection followed several tense hours in which officials were held up in a front-line area as gunfire echoed from nearby battles.3. China committed human rights violations in Xinjiang, UN finds The UN high commissioner for human rights has accused the Chinese government of committing “serious human rights violations” in its treatment of Uyghurs and other Muslim ethnic minorities in Xinjiang. The long-anticipated report said there was credible evidence of torture and gender-based violence in detention camps in the north-western region of China.Explainer: Following the UN report, some western governments, including the UK, have called for the UN to start a formal investigation of abuses in Xinjiang. Here’s what could happen next.4. IMF reaches preliminary deal on $2.9bn Sri Lanka bailout The announcement yesterday, at the end of a week-long IMF mission, offered the first indication of a path out of insolvency for the country of 22mn, which has run out of cash and suffered crippling shortages of fuel and essentials this year.

Demonstrators on the streets of Colombo in July protesting against the government’s failure to tackle Sri Lanka’s economic crisis © Chamila Karunarhne/EPA-EFE/Shutterstock

5. China’s carbon emissions fall 8% as economic growth slows The fall in emissions in the April-to-June quarter compared with the same period last year marks the sharpest decline in the past decade, according to climate research service Carbon Brief. But it also reflects a dramatic slowing in Chinese economic growth caused by large-scale coronavirus lockdowns. Further reading: Click here to receive this weekend’s The Climate Graphic: Explained newsletter. Have you kept up with the news this week? Take our quiz. The days aheadUS non-farm payroll data Figures are expected to show the US economy added 300,000 jobs last month, down from a five-month high of 528,000 in July, and that the unemployment rate is expected to remain at a historically low level of 3.5 per cent.FT Weekend Festival It’s not too late to buy in-person or digital passes to tomorrow’s FT Weekend Festival featuring debate, tastings, Q&As and more. As a newsletter subscriber, claim £20 off your festival pass using promo code FTWFxNewsletters at: ft.com/ftwfMikhail Gorbachev’s funeral Gorbachev is to be buried on Saturday at Moscow’s Novodevichy cemetery, the final resting place for hundreds of Russian dignitaries, alongside his wife Raisa, who died in 1999. President Vladimir Putin will not attend because of scheduling conflicts, the Kremlin has said.What else we’re reading and listening to China waits on ‘miracle’ to end zero-Covid policy Experts believe President Xi Jinping’s zero-Covid policy will continue into 2023 even as Xi’s relentless efforts to rid China of coronavirus are taking a huge economic toll. Officials are holding out for Chinese scientists to develop vaccine technology to stop coronavirus from spreading.

India’s bid to join the global semiconductor race India wants to take a step up the manufacturing value chain, with a high-stakes bid to begin making semiconductors. But to have any chance of achieving its goal, India will need to move exceptionally quickly and decisively.Related listen: On the Rachman Review podcast this week, Gideon speaks to one of the most distinguished historians of modern India to discuss whether India will soar or struggle in the coming years.Australia seeks to rival China on lithium production Australia’s first battery-grade lithium refinery, the largest outside China, has opened talks with electric vehicle makers as it seeks to meet surging demand from global automakers for the mineral. Global lithium supply is expected to triple in the next nine years, according to investment bank Barrenjoey.Ai Weiwei’s a tribute to the ‘ultimate freedom’ The centrepiece of a new solo show in the Church of San Giorgio Maggiore by the Chinese artist Ai Weiwei entitled “La Commedia Umana”, has been assembled from more than 2,000 pieces of black Murano glass fashioned to replicate bones, organs and surveillance cameras. The result is a hypnotic, hanging ossuary that begs us to fight for our freedom before we die.Why intellectual humility matters Intellectual humility can be thought of as a willingness to recognise our cognitive limitations and biases, and to be more interested in understanding the truth of an issue than in being right. A lack of it can make some people believe in conspiracy theories and false news reports, writes Jemima Kelly.ScienceThe headlines this year have been dominated by war in Europe, soaring inflation and worries about climate change. But there has also been a series of remarkable breakthroughs in everything from microbiology to astronomy. The FT’s science desk has put together the top five stories this year.

A young, star-forming region called NGC 3324 in the Carina Nebula, as captured by the newly operational James Webb Space Telescope © Nasa, ESA, CSA, STScI More

The maintenance of 600 reais ($114.88) monthly payments under the Auxílio Brasil program is one of the main promises of President Jair Bolsonaro in his quest for reelection in October, while he trails former president Luiz Inácio Lula da Silva in opinion polls.But in next year’s budget bill, the government reduced cash handouts to 400 reais because keeping the current level would require circumventing the spending cap rule, and there is no legal provision for this so far. Speaking at an event hosted by Sebrae, which promotes the competitiveness of small businesses, Guedes said a calamity decree could be signed if the war in Eastern Europe continued.During the pandemic, the state of calamity made it possible for extraordinary expenses to be made without having to comply with the spending cap rule.Later on Thursday, at a different event, he stressed that a calamity decree would not be the ministry’s “preferred” solution, as it would be temporary. A permanent action would involve taxing dividends received by the “super rich,” he added.Still, Guedes said the payment of 600 reais next year is “guaranteed,” and said that dividend taxation would ensure sufficient funds for the program and compensate for greater income tax exemption for the poorest Brazilians – addressing two campaign promises made by Bolsonaro.Guedes predicted the country’s gross debt would fall to 76.6% of gross domestic product after the development bank BNDES returns 90 billion reais ($17.26 billion) it owes the Treasury, which he said would happen soon. Guedes also said the Federal Reserve is in talks with the Brazilian central bank to implement the Pix instant payment system in the United States.Launched in November 2020, Pix is ​​free of charge for individuals but policymakers allow banks and payment institutions to freely define costs for merchants, both for transfers and receiving funds.Its massive use by Brazilians has seen it surpass the level of transactions with credit and debit cards in the country.($1 = 5.2227 reais)(Reporting Rodrigo Viga Gaier and Marcela Ayres; Editing by Steven Grattan and Richard Pullin) More

BENGALURU (Reuters) – New Zealand’s house prices are forecast to fall 10% this year and 5% next as aggressive interest rate hikes take some heat out of a blazing housing market, but not enough to solve the ongoing affordability crisis, a Reuters poll found.Billions of dollars in government stimulus and historically low interest rates during the pandemic have inflated house prices far ahead of wage growth in one of the least affordable housing markets in the world.House prices have risen more than 40% since the start of the pandemic and nearly doubled in the last seven years, which has led to increased homelessness, fuelled inequality and kept many would-be first-time homebuyers as renters.Although house prices fell a modest 1.6% year-on-year in July, its first annual fall since 2011, they are still very far from returning to pre-pandemic levels.Average home prices were expected to decline 10.0% this year, according to an Aug. 15-Sept. 1 Reuters survey of 11 property analysts. Those estimates showed a slightly deeper decline than the 9.0% fall predicted in a May poll.Another 5.0% fall was expected next year.”House prices will continue to decline and there’s not much in the economic outlook that will stop that,” said Sharon Zollner, chief economist at ANZ.”With private-sector wage growth accelerating to 7.0% in the year to June 2022, there’s a risk the Reserve Bank of New Zealand (RBNZ) may need to lift interest rates even higher than expected, which would weigh further on real house prices.”Despite the expected fall, the drop in prices was too small to offer much reprieve for first home buyers. Average prices have soared over 250% since 1998, almost four times the average increase across OECD countries.The RBNZ, which has considered house prices in its policy deliberations, has hiked rates by a total of 275 basis points since October last year and is forecast to take rates to 4.0% early next year.Prices must drop around 20% to reach a sustainable level, the central bank says. But some respondents in the poll said more was required.Capital Economics, Infometrics and Kiwibank said average house prices would have to fall between 20 and 30% – roughly the amount they fell after the oil shock of 1973 – to make housing affordable.”It will take until at least 2027 for house prices to be back towards a more fair valued position, in real terms,” said Brad Olsen, principal economist at Infometrics.When asked to describe the level of New Zealand house prices on a scale of 1 to 10, from extremely cheap to extremely expensive, the median response was 8. For Auckland, it was 9.(For other stories from the Reuters quarterly housing market polls:) More

WASHINGTON (Reuters) -A subsidiary of Dutch medical device maker Philips has agreed to pay over $24 million to resolve alleged false claims over respiratory-related medical equipment, the U.S. Justice Department said on Thursday.The subsidiary, Philips RS North America LLC, formerly known as Respironics Inc, resolved allegations that it misled federal healthcare programs by paying kickbacks to durable medical equipment suppliers, the Justice Department said in a statement.Respironics allegedly gave the suppliers physician prescribing data free of charge that could assist their marketing efforts to physicians, the Justice Department said.”Paying illegal remuneration to induce patient referrals undermines the integrity of our nation’s healthcare system,” said Principal Deputy Assistant Attorney General Brian Boynton, head of the Justice Department’s civil division.Respironics also entered into a five-year agreement with the U.S. Department of Health and Human Services, Office of the Inspector General to implement a compliance program that includes review of arrangements with referral sources and monitoring of Respironics’ sales force, the Justice Department said.A Philips spokesperson said its subsidiary agreed to settle the claim to avoid the required expense of litigating the allegations.”In agreeing to a settlement, Philips Respironics is not acknowledging any alleged facts, liability, or wrongdoing in the claim,” the company spokesperson said in an emailed statement.”This agreement should have no impact on our customers or the patients they serve,” the company added More

ORLANDO, Fla. (Reuters) – While the Federal Reserve and other central banks obsess over avoiding a 1970s style ‘wage-price’ spiral, U.S. GDP data last week showed that the risk of inflation remaining elevated is more nuanced. Call it a ‘profit-price’ spiral. By many measures, the U.S. labor market is as strong as it has been for decades. As labor is the biggest single input into firms’ total costs, policymakers are right to fret that ‘excessive’ wage demands may stoke or even accelerate inflation.But looked at through the prism of profits, corporate America is also in rude health, especially big business. In the second quarter this year U.S. companies raked in profits that, depending on the cut, were the highest on record, or close to levels not seen in over half a century.This is an inflationary threat too, but we hear far less from policymakers about it than the risk of wages fueling a price spiral that would only be crushed by interest rate increases like those administered by former Fed Chair Paul Volcker in the early 1980s.The battle between labor and capital, which saw capital take an ever-growing share of national income over the past 30 years, is not a new issue, certainly not politically.But with inflation at a four-decade high, it is emerging as a policymaking challenge, one the Fed has to take on board, says Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. “I’m sure higher corporate profits are, indirectly, encouraging the Fed to increase interest rates. To the extent that prices are rising everywhere and corporate profits are staying high, those are a direct corollary to higher inflation,” he said.As a share of GDP, U.S. corporate profits in the second quarter rose to 12.25%, around their highest levels since 1950. Profit margins for non-financial firms rose to 15.5% in the same period, closing in on last year’s peak going all the way back to the 1960s.Less surprisingly, perhaps, nominal profits in Q2 were the highest ever. Still, the burst through the $2 trillion barrier is noteworthy. GRAPHIC: U.S. corporate profit margins (https://fingfx.thomsonreuters.com/gfx/mkt/zdvxomyblpx/USCorpProfitMargins.jpg) GRAPHIC: U.S. corporate profits as share of GDP (https://fingfx.thomsonreuters.com/gfx/mkt/znpnewdrdvl/CorpProfit1.jpg) GRAPHIC: U.S. non-financial corporate profits top $2 trillion (https://fingfx.thomsonreuters.com/gfx/mkt/gdvzyxroypw/CorpProfits2.png) This comes at the same time U.S. labor market conditions are the tightest in decades also. The unemployment rate was last lower than today’s 3.5% over half a century ago, and there are two job openings for every unemployed person. While worker strikes and labor disputes are less likely in the United States than in Europe, Fed officials would not welcome wage growth matching inflation, far less exceeding it. They would argue this would have one of two consequences, both of which go against their dual mandate of price stability: higher wages are passed onto consumers, leading to even higher inflation; or firms simply cut back on staff. UNFAIR BURDEN?Fiscal policy is more suited to curbing U.S. corporate pricing power. As Robert Reich, professor at the University of California, Berkeley, and a former Labor secretary, notes, the Biden administration passed a 1% tax on stock buybacks in the recently enacted Inflation Reduction Act, and a minimum corporate tax. This doesn’t go far enough, he argues, but recognizes that policies such as a windfall profits tax, price controls, higher taxes on corporations and the wealthy, and bolder antitrust enforcement face stiff opposition in Washington.Absent a powerful fiscal push, the onus falls on the Fed to use the blunt instrument of job-sapping and recession-seeding higher interest rates.”This is the only tool in the Fed’s tool kit. The problem is that this puts most of the burden of fighting inflation on average working people and the poor,” Reich told Reuters. GRAPHIC: U.S. real earnings growth (https://fingfx.thomsonreuters.com/gfx/mkt/egpbkrndqvq/USRealEarnings.jpg) There’s little doubt that Fed communications focus on the risks posed by wage pressures more than corporate pricing.Minutes of the Fed’s July 26-27 policy meeting reveal seven mentions of ‘wage’ or ‘wages’, 17 of ‘labor market’, eight of ‘job’ or ‘jobs’, and not one of ‘profit’.Transcripts of Fed chief Jerome Powell’s press conference on July 27 show nine references to ‘wage’ or ‘wages’, 38 mentions of ‘labor market’, 15 mentions of ‘job’ or ‘jobs’, but not a single mention of ‘profit’, ‘corporate’, ‘company’, or ‘companies’.If the political establishment in Washington is unwilling and, the Fed is unable, to cool the corporate profit boom’s potential price pressures, maybe the economy will do it for them.As tighter financial conditions slow activity and demand, profit growth should cool and companies’ margins should decline. “Earnings growth is slowing down and heading towards zero. This implies pressure on the margin, which the consensus now forecasts to decline by 5% in 2022,” equity analysts at Societe Generale (OTC:SCGLY) wrote on Thursday. (The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Andrea Ricci) More